National Bank of Denmark governor highlights housing concerns

Over the last year, Danish households have become more optimistic about the housing market, and more people expect prices to rise, National Bank of Denmark governor Lars Rohde said in a recent speech.

Rohde added, however, that the recovery is unevenly distributed across the country, with prices in Copenhagen have risen by more than 10%. This should prompt people to ask, in light of the recent overheating of the Danish housing market, "whether things are moving a bit too fast" in the capital, he said.

"Investor confidence in the creditworthiness and liquidity of mortgage bonds is at the core of the Danish mortgage credit system," Rohde said - arguing that, in order to maintain this confidence, the mortgage banks should "take a cautious approach and not go too near the statutory limits."

Rohde also argued that the structure of housing taxes contributes to instability in the housing market and that households' long-term loans with annual refinancing are based on bonds with much shorter maturities.

"This has given mortgage banks qualities resembling those of ordinary banks, in that there may be 'runs' on them," Rohde said.