In the fall of 2022, significant price fluctuations were observed in Danish mortgage bonds. During the same period, some banks affiliated with mortgage credit institutions increased their share of bond purchases from the affiliated mortgage credit institution. Mortgage credit institutions are now being advised to ensure they are not overly reliant on selling bonds to a single bank.
The Danish mortgage market is generally well-functioning, ensuring transparent pricing for property financing through daily issuances of mortgage bonds.
However, the vulnerability of the mortgage market becomes apparent during turbulent times, as banks tend to buy a larger proportion of bonds from their affiliated mortgage credit institutions. This was evident in the autumn of 2022, when one bank notably increased its share of bond purchases from its affiliated mortgage credit institution.
Mortgage credit institutions are urged to guarantee they can always sell their newly issued bonds. Dependence on a single bank for sales, especially during periods of significant price fluctuations, could potentially undermine the resilience of the Danish mortgage market. Therefore, institutions are advised to continually ensure they have robust options for selling their newly issued bonds.
The stability of the Danish financial system relies on a well-functioning mortgage market. Danish mortgage bonds, issued daily for housing and property financing, play a pivotal role in the national real estate market. Financial entities, including banks and pension companies, utilize mortgage bonds for liquidity placement and as part of their liquidity reserves. It is crucial for the Danish mortgage market to remain resilient and well-functioning, even during periods of financial unrest.