Declaration on expensive mortgage loans
Expensive mortgage loans. Can expensive mortgage credit abroad justify price increases in Denmark? Can it pay to change a mortgage company?
This blog is based on last week’s blog Therefore you pay too much for your mortgage loan . Here I looked at the paradox that mortgage companies can raise prices, especially for floating-rate loans without losing customers.
The mortgage association’s reply was quick and hard in a comment on my blog and on the association’s website under the heading “Resolve claims on expensive mortgage”. Here, the Danish Mortgage Association tries to reject my points as unprovoked and unreasonable.
Mortgage rates in Denmark and abroad
It is worth noting that the Mortgage Credit Association completely avoids the consequences of price increases for their customers. According to the association, the customers obviously only have to accept price increases and praise themselves for the fact that prices are still lower than in other countries, such as Germany.
But it is a bad argument for raising prices and undermining a well-functioning Danish mortgage credit system that prices are higher in other countries. Mortgages are more expensive in Germany, because the German lending system is ineffective, and German mortgage loans are completely different to Danish mortgage loans.
If the Germans introduced a mortgage system similar to the Danish one, German homeowners would get significantly cheaper mortgages. It just doesn’t happen, because it’s not in the German banks’ interest, so they would make less money.
Since it does not make sense to compare mortgage-credit prices in Denmark and other countries, we may perhaps pay attention to the matter: the conditions on the Danish mortgage-credit market.
Mortgage loans on the banks’ terms
The mortgage-credit association’s response shows how mortgage-credit is thought to be at the executive board meetings in banks and mortgage-credit companies. After the banks have taken over the ownership, they have not wanted to continue the mortgage credit companies on the mortgage credit’s own terms.
Mortgage companies were former associations that handled lenders ‘and borrowers’ interests by providing cheap and secure loans. The banks now want the mortgage loan to generate profits and return on equity in the same way as the banking business. And since the banks determine the prices through their ownership, the recipe is ready, set the prices up! “Like in Germany,” it is tempting to add.
Evidence of lack of competition on mortgage loans
In last week’s blog, I argue that there is not enough competition in the mortgage market and that the prices are set by the providers more than the market. Mortgage rules and the resulting market transparency make it difficult for borrowers to change companies.
It is not surprisingly disagreed with the Mortgage Credit Association. However, when Nykredit can increase its market share in spite of significant price increases, this is a clear indication that competition is lacking. There can be many reasons for lack of competition. Let me mention 3 here because it is difficult to change the mortgage company.
The transparency goes to the whistle in the mortgage industry
Therefore, it is difficult to change the mortgage company
- Lack of confidence that the new company will not raise the price either
- It is too expensive to change the mortgage company
- It is next impossible to change the mortgage company if the mortgage is over 80%
In principle you should change company if there is money to make from it – even if the confidence in the market can be in a small place. After all, this is the only way customers can strengthen their competition.
There are only 4 ordinary mortgage companies in the market and 5 if you count Totalkredit, which is owned by Nykredit, with and omits DLR. It is obvious to few providers to create effective competition. As the situation is today, the mortgage market is fully functioning on the banks’ premises, and the mortgage system is quietly watered down completely!
New rules need to be made that make it easier to establish a mortgage credit company and which, in particular, makes it easier and cheaper to change the mortgage company. The Competition Authority should, therefore, in the review currently underway, recommend the Minister to change these parts of the mortgage credit legislation.
What does it cost to change a mortgage company?
Should you change your mortgage company now?
Of course, whether it is worth changing a mortgage company depends on your loans. For example, if you have loans with a fixed interest rate of 3-4%, it is worth considering.