Foreign Investors Now Own a Third of Denmark’s Fixed Mortgages

(Bloomberg) -- Foreign ownership of Danish fixed-rate mortgages has reached a new high of 32 percent, three times its 2012 level, according to central bank data published on Thursday.

The attractiveness of the world’s largest mortgage-backed covered bond market to international investors has helped keep Danish mortgages low, with local home buyers now being offered 30-year loans at a fixed rate of just 1.5 percent.

But the central bank also warns that a “dependence on foreign investors can increase market fluctuations in times of crisis.” Japanese and German investors are traditional buyers of AAA-rated Danish bonds.

Timothy Smal, head of fixed income at Silkeborg, Denmark-based Jyske Bank, says the risk of a sudden exit from the market is small, given that this is “not a homogeneous group.”

“The fact that Denmark probably isn’t their main place for investing might make it easier for them to exit the market,” Smal said in a phone interview. However, “at the moment there’s no sign of things heading that way.”

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