COPENHAGEN, March 31 Denmark should tighten
mortgage regulations for some of its most highly indebted
households to help protect financial stability, the country's
powerful Systemic Risk Council said in a statement.
Specifically, the government should prevent most borrowers
in Copenhagen and Aarhus, the top two cities, from taking on
interest-only or variable-interest loans if their debts exceed
400 percent of pretax income, the advisory body added.
Only about 15 percent of loans granted by mortgage
institutes in the two regions should be exempt from the
restrictions, it said.
The risk panel, which includes the Danish central bank
governor and the head of the Financial Supervisory Authority as
well as other experts, was established in 2013 in response to
the 2008 financial crisis.
Danish housing prices fell sharply in the wake of the
crisis, but key urban areas have since seen a booming property
market accompanied by rising household debt.
The government has now three month's time to adopt the
request from the council. If refused the government needs to
publish an account, where it explains and argues its reasons for
not following the request.
Denmark's covered bond market amounts to about 2.8 trillion
Danish crowns ($402 billion).
($1 = 6.9596 Danish crowns)
(Reporting by Erik Matzen, editing by Terje Solsvik)