The Danish Mortgage Model 

The Danish mortgage model is regarded as being one of the best of its kind in the world. It contains a unique balance principle and a market-based repayment system. Hence, the Danish mortgage credit market is characterised by transparency, competition and stability.

The interest rate of a mortgage loan and the prepayment price are directly reflected in the price of the mortgage bonds funding the loan. Everybody can monitor bond prices daily – for instance in newspaper price lists. Interest rates mirror the prices investors pay for the bonds.

Danish mortgage bonds are attractive due to their high security level, leading to low mortgage rates. The credit rating agency Moody’s has repeatedly lauded the Danish mortgage system, emphasizing that Danish mortgage banks operate in a transparent market and that loan rates are low.

The European Consumer Organisation has praised the option of prepaying a loan on favourable terms as being smooth and efficient, and the EU Commission has singled out the Danish prepayment system in its White Paper on mortgage lending from December 2007.

The strongest benefits of the Danish mortgage model are the following:


  • Low, competitive prices of loans against mortgages on real property
  • Transparency in prices and repayment terms for the loans
  • Market-based pricing 
  • Availability for all owners of real property 
  • Supports financial stability

Publication on the traditional Danish mortgage model


The Association of Danish Mortgage Banks has released the publication: "The traditional Danish mortgage model". The publication describes the principles of the Danish mortgage model.


It also describes the recent changes to the Danish legislation on covered bonds, and the reasons why the financial crises did not lead to any serious consequences for neither Danish mortgage banks nor lenders of mortgage loans.


Download the publication here (1,4 MB)