Households' Risks from a Danish Financial Stability Perspective

Tue MathiasenDanmarks Nationalbank

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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

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Growth and recession- net borrowing / net lending

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

-8

-6

-4

-2

0

2

4

6

8

10

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 Financial corporations General government

Households and NPISH Rest of the world

Pct.

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Growth and recession- Changes in household balances

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Households’ debt and wealth - Real economy spill-over

0

50

100

150

200

250

300

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

Pct.

-15

-10

-5

0

5

10

15

Index

Net financial wealth (pct. of disp. income) Consumer confidence (right)

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Households’ debt and wealth - Real economy spill-over

Households' net borrowing / net lending, real investments and savings(Pct. of disp. income - 4 qrt. avg.)

-15

-10

-5

0

5

10

15

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 borrowing / net lending Real investments Savings

Pct.

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Households’ debt and wealth- Financial wealth

Households' financial net wealth (Pct. of disp. income - 4 qrt. avg.)

-400

-200

0

200

400

600

800

1000

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 wealth Financial assets Liabilities

Pct.

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Households’ debt and wealth- Total wealth

Households' financial and total net wealth (Pct. of disp. income - 4 qrt. avg.)

-400

-200

0

200

400

600

800

1000

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 wealth Residential property, gross valueLiabilities Total assetsFinancial assets

Pct.

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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

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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

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Households’ debt and wealth- Across Nordic countries

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Households’ debt and wealth- Gross debt

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Households’ debt service issues- macro level

Debt service, housing loans

0

300

600

900

1.200

1.500

1.800

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

5

10

15

20

25

30

Housing loans, balance Interest payments (right)

Repayments (right) Debt service, housing loans (right)

Kr. billion Kr. billion

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Households’ debt service issues- composition of mortgage-credit

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Households’ debt service issues- composition by mortgaging ratio

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Households’ debt service issues- composition by income

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Households’ debt service issues-exposure to interest rate changes

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Way forward In general, a growing demand for

official statistics supporting financial stability analysis

Examples of specific issues Real property Micro-macro link