Households' Risks from a Danish Financial Stability Perspective Tue Mathiasen Danmarks Nationalbank

Agenda

  Aspects of the latest period of growth and recession Households’ debt and wealth  financial   non-financial Households’ debt service issues  at the macro level  at the micro level  Way forward 25-04-2020 DANMARKS NATIONALBANK 2

Growth and recession - net borrowing / net lending Pct .

0 -2 -4 -6 -8 10 8 6 4 2

Net borrow ing / net lending (Pct . of GDP - 4 qrt . avg.)

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Non-financial corporations Households and NPISH Financial corporations Rest of the w orld General government 25-04-2020 DANMARKS NATIONALBANK 3

Growth and recession - Changes in household balances 25-04-2020 DANMARKS NATIONALBANK 4

Households’ debt and wealth - Real economy spill-over Pct .

300 250 200 Index 15 10 5 150 100 50 0 -5 -10 0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 -15 Net f inancial wealt h (pct . of disp. income) Consumer conf idence (right ) 25-04-2020 DANMARKS NATIONALBANK 5

Households’ debt and wealth - Real economy spill-over Pct .

15 10 5 0 -5 -10 -15

Households' net borrow ing / net lending, real invest m ent s and savings (Pct . of disp. incom e - 4 qrt . avg.)

4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 2004 2005 2006 2007 2008 2009 2010 2011 Net borrow ing / net lending Real investments Savings 25-04-2020 DANMARKS NATIONALBANK 6

Households’ debt and wealth - Financial wealth Pct .

Households' f inancial net w ealt h (Pct . of disp. incom e - 4 qrt . avg.)

1000 800 600 400 200 0 -200 -400 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Financial net w ealth Financial assets Liabilities 25-04-2020 DANMARKS NATIONALBANK 7

Households’ debt and wealth - Total wealth Pct .

1000 800 600 400 200 0 -200 -400

Households' f inancial and t ot al net w ealt h (Pct . of disp. incom e - 4 qrt . avg.)

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Financial net w ealth Liabilities Financial assets Residential property, gross value Total assets 25-04-2020 DANMARKS NATIONALBANK 8

 Households’ debt and wealth  - Property estimations Lack of official statistics High quality data sources    Register of all Danish property (buildings and land) Continuous valuation of all Danish property  for tax purposes Property price statistics  By Statistics Denmark  Property price index  By Association of Danish Mortgage Banks  Quarterly data on average square metre prices from open market transactions 25-04-2020 DANMARKS NATIONALBANK 9

 Households’ debt and wealth - Property estimations (cont.) Estimations within Danish NCB  Method  Combination of stock (register data) by owner sector and transaction prices (mortgage bank info.)  Stratification by groups of municipalities with similar degrees of urbanisation  Possibility of selection bias (actual traded property)  Not a full usage of all available high quality data sources 25-04-2020 DANMARKS NATIONALBANK 10

Households’ debt and wealth - Across Nordic countries 25-04-2020 DANMARKS NATIONALBANK 11

Households’ debt and wealth - Gross debt 25-04-2020 DANMARKS NATIONALBANK 12

Households’ debt service issues - macro level Kr. billion 1.800

1.500

1.200

900

Debt service, housing loans

Kr. billion 30 25 20 15 600 300 0 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 0 Housing loans, balance Repayments (right) Interest payments (right) Debt service, housing loans (right) 10 5 25-04-2020 DANMARKS NATIONALBANK 13

Households’ debt service issues - composition of mortgage-credit 25-04-2020 DANMARKS NATIONALBANK 14

Households’ debt service issues - composition by mortgaging ratio 25-04-2020 DANMARKS NATIONALBANK 15

Households’ debt service issues - composition by income 25-04-2020 DANMARKS NATIONALBANK 16

Households’ debt service issues -exposure to interest rate changes 25-04-2020 DANMARKS NATIONALBANK 17

Way forward

 In general, a growing demand for official statistics supporting financial stability analysis  Examples of specific issues  Real property  Micro-macro link 25-04-2020 DANMARKS NATIONALBANK 18