How big is a development in our lending habits?
In recent years, we have heard a lot about interest rate developments, and what it means – but how much has it really changed ‘ lending habits? The total amount of the F5 loan has almost tripled in the last 10 years, whereas the fixed-rate loan is heading in the opposite direction. F1 borrowers even get money back , as their interest rates have gone down.
Here at Wealthy Loan we have taken a look at the development of the mortgage loan from 2008 to 2018. But first we look at the individual loan types. As you may already know, when you buy a home, you can borrow up to 80% of the value of the mortgage. This means you may need to fund the rest of your home with a home loan.
The mortgage loan can be taken either as a fixed-rate loan or a variable-rate loan, also called a flexible loan (F-loan). Both types of mortgages are interesting to investigate as our lending habits have changed significantly over the last ten years.
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Mortgage loan development from 2008 to 2018
The are flowing to the mortgage banks and we are borrowing money like never before. In 2018, we have borrowed DKK 2,700 billion. DKK – this is a total of DKK 600 billion. more than we did in 2008 . But the development has not been monotonous. Flexible loans only become more popular as time goes on.
Diagram of Wealthy Loan
Since 2008, the loans have changed from the fact that almost half of our money was as fixed-rate loans. Now it is almost only a third. Although we still lend almost as much money in fixed-rate loans, the percentage of total lending has fallen.
The need for a variable rate mortgage has increased. We have been particularly pleased with F2 to F5 loans compared to previous ones. These loans have increased in cash by 276% since 2008 , which means that just over a quarter of our loans are now F2 to F5 loans.
It has meant that the F1 loans have fallen in percentage terms instead. If we take a look at the amounts, we see that more money is still being lent out. Lending increased by 7%. That doesn’t sound like much, but in reality it means an increase of $ 66 billion. since 2008 .
The reason for this significant change in our lending habits can be found, among other things, in interest rate developments. Since 2008, we have seen a decline in all loan rates. Even the bond yield for a fixed-rate loan has fallen and still does. As interest rates have fallen to the lowest level ever , we have started to borrow more money.
The interest rate trend has shown that in Denmark we are moving more into low interest rates than a safe and higher interest rate.
The higher interest rate on a fixed-rate loan does not attract us as much as before. The reason is that if interest rates fall, or are as low as now, a flexible loan will almost always be the cheapest. Other costs and fees can always raise the price, but the repayment will be cheaper in a flexible loan.
The F1 loan has had the greatest interest rate trend since 2008 . Over the years, interest rates have fallen below 0%. The reason for the increase in F1 loans must therefore be found in the fall in interest rates. In fact, if you choose an F1 loan now, you will get money back . If you choose an F1 loan, on the other hand, you are dependent on renegotiating the loan again next year, and interest rates may have increased here.
Interest rates have had the greatest impact on F2 to F5 loans. We have only selected the F5 rate here, but the F2 to F4 rates are almost the same. The F5 interest rate has fallen so significantly that the today take this loan if they know that their income will continue unchanged for the next five years. It is therefore reasonably attractive to be able to renegotiate if the income should have changed, even if the interest rate should have done so.
On certain variable-rate loans, you can add interest rate ceilings should interest rates rise.
This means that if interest rates fall, the interest rate ceiling does not matter and can therefore be more of an expense than a hedge. The addition of the interest rate ceiling to the flexible loans has therefore seen a decrease due to the fall in interest rates:
- 73% reduction in variable rate loans with interest ceiling from 2008 to 2018. From DKK 319bn in 2008 to DKK 86 billion DKK in 2018
- 99.9% decline in variable-rate loans with affected interest rate ceiling from 2008 to 2018. From DKK 214bn in 2008 to DKK 0.16 billion DKK in 2018
In order to illustrate the development of the mortgage and interest rates, all values have been selected from the sources below. Based on this, we have calculated the total percentage increase as mentioned earlier.
|Mortgage loan development||Denmark’s total lending in each loan type is collected through Finans Danmark, which publishes lending statistics every quarter.||Find Loan|
|Bond yields||Through Finans Danmark, the historical bond rate for fixed-rate loans has been collected. The interest rate history dates back to 1997 at Finans Danmark.||Find Loan|
|Flex-loan Interest||Realkredit Danmark has a history of the cash loan interest rate for Flexlån back to 1997. The interest rate on which this study is based is paid in DKK.||Drestigartos Loan|
If you find it difficult to find a head and tail in the mortgage world, you can read more about home loans here at Wealthy Loan. We also offer free and non-binding offers from our own partners. If you send us your needs, we can adapt a home loan to exactly your current situation.