Daily Archives: December 14, 2016

Household wealth and debt

Why is household debt higher in Denmark than in other countries?

The main reason why households raise debt is that they buy homes or consumer durables, such as cars. Hence, household debt cannot be viewed in isolation from household wealth.
A well-developed financial system

Households’ access to mortgage their wealth varies considerably across countries. Compared with other countries, it is relatively easy and inexpensive to borrow against wealth in Denmark. One of the reasons is that Denmark has a very well-developed financial system. For example, the mortgage-credit system allows homeowners to raise inexpensive loans using the home as collateral. The development of new loan types, such as adjustable-rate and deferred-amortisation loans, has also played a role, as the introduction of these loan types has contributed to increasing house prices and thereby also debt.
Large pension wealth

Danish households differ from households in most other countries in that they have very large pension wealth. This means that many Danes can look forward to relatively high income after retirement, which reduces their need to be debt-free when they retire.

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