The Danish Mortgage Model
The Danish mortgage model is regarded as being one of the best of its kind in the world.
It consists of a unique balance principle, match funding and a market-based prepayment system. These features ensure that the Danish mortgage credit market is characterised by transparency, competitiveness and stability.
The interest rate of a mortgage loan and the prepayment price directly reflect the price of the mortgage bonds funding the loan. The interest rates mirror the prices investors pay for the bonds. The bond rates are public and are published in the newspapers and on the mortgage banks’ web sites on a daily basis.
The European Consumer Organisation has lauded the option of prepaying a loan on favourable terms as a smooth and efficient solution. The EU Commission singled the Danish prepayment system out in its White Paper on mortgage lending.
The benefits are:
- Low, competitive prices on loans against mortgages on real property
- Transparency in prices and repayment terms
- Market-based pricing
- Available to all owners of real property
- Supports financial stability