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Mirror, Mirror, who is the Fairest of Them All? Reflections on the Design of and Risk Distribution in the Mortgage Systems of Denmark and The UK

Published online by Cambridge University Press:  01 January 2020

Jesper Berg  and
Christian Sinding Bentzen
Jesper Berg*
Affiliation:
Nykredit, Copenhagen
Christian Sinding Bentzen*
Affiliation:
Nykredit, Copenhagen
*
E-mail: jrb@nykredit.dk
E-mail: jrb@nykredit.dk
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Abstract

This paper describes the Danish mortgage system by comparing it with the UK mortgage system. The Danish mortgage system has attracted attention in the literature on the design of mortgage systems. It is a type of narrow banking model where mortgage loans are financed by specialised institutions that issue bonds with cash flows that match that of the mortgage loans. Thereby, the Danish mortgage system outsources many of the risks that are usually kept on the balance sheet of banks to bond investors. Measured in terms of four criteria, the Danish mortgage system performed better during the financial crisis than the UK mortgage system. However, both in Denmark and the UK, alignment of the mortgage and the pension systems could offer significant advantages.

Keywords

financial intermediariesmortgagemortgage marketrefinancingregulationG21G28R31
Type
Research Articles
Information
National Institute Economic Review , Volume 230 , November 2014 , pp. R58 - R75
Copyright
Copyright © 2014 National Institute of Economic and Social Research

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Footnotes

The views expressed are not necessarily those of Nykredit. The authors would like to thank Mads Drachmann Kolding and Lars Navntoft Henningsen for their assistance and Morten Bech, Jacob Gyntelberg and two anonymous referees for comments.

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