Danish central bank warns over interest-only mortgages

Amortisation requirements for “riskiest loans” may reduce housing volatility, report says

fixed income

Interest-only mortgages further increase housing prices and can expose lenders to greater losses, research from the National Bank of Denmark finds.

The central bank’s examination of all housing transactions between 2011 and 2021 showed that homes financed with an interest-only mortgage have consistently been more expensive than homes financed with an amortising mortgage.

Demand for housing increases more strongly with interest-only mortgages than with traditional financing when interest rates fall

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