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Danes Lured By Cash Defy Warnings On One-Year Debt: Mortgages

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With a growing software business, three children, two cars and a house in the Copenhagen suburbs, Jacob Larsen is disregarding central bank warnings and sticking with his practice of refinancing his mortgage every year.

“It’s meant more cash in hand,” Larsen said. “We’ve traveled, we’ve spoiled our kids, we’ve had a good life.”

Larsen is among the three out of 10 Danish homeowners with loans backed by annual bond sales, the country’s most popular adjustable-rate product for financing ownership amid record-low interest rates. Denmark’s central bank, the country’s financial regulator, and international credit-rating companies have warned since at least 2009 that so much one-year debt makes the $550 billion market vulnerable to a sharp decline in investor demand.

Starting this month, regulators and lawmakers plan the biggest changes to Denmark’s mortgage market in more than a decade to ensure it can function through a market freeze such as the one that followed the collapse of Lehman Brothers Holding Inc. Banks have been selling the bonds almost since the government first allowed adjustable-rate mortgages 18 years ago.


“It’s an unlikely scenario that there won’t be anyone to buy these bonds,” said Larsen, chief operating officer and co-owner of BridgeIT, which in January signed a deal to help EBay Inc. expand into Russia. “Somebody would step in -- the central bank or politicians.

Danish mortgage banks each year sell bonds equal to more than 40 percent of Denmark’s $340 billion economy to refinance household and commercial mortgages after falling yields catapulted the one-year loans, introduced in 1996, to their top rank. Like U.S. securities, most Danish bonds are rated AAA. Denmark’s mortgage bond market is the biggest in the world on a per capita basis.

Paging Mr Bailout, Mr Bailout!

How unlikely is unlikely? An accident waiting to happen.

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Denmark in many ways seems a great place.

But is debt/mortgages the hidden problem?

How are house prices?

Seems confusing, expensive flats in Copenhagen, talk to bulldozing small villages in the countryside.

Anyone know much about Danish propertty? Co-ops - how they work?

Is property within commutable distance of good/international company jobs reasonable price?

What's it like in Jutland / Roskilde other places for jobs/property costs?

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