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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

Author

Listed:
  • Jesper Berg
  • Christian Sinding Bentzen

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.

Suggested Citation

  • Jesper Berg & Christian Sinding Bentzen, 2014. "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," National Institute Economic Review, National Institute of Economic and Social Research, vol. 230(1), pages 58-75, November.
    • Handle: RePEc:sae:niesru:v:230:y:2014:i:1:p:r58-r75
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    Citations

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    Cited by:

    1. Jesper Berg & Laurent Clerc & Olivier Garnier & Erik Nielsen & Natacha Valla, 2015. "From the Investment Plan to the Capital Markets Union: European Financial Structure and Cross Border Risk-sharing," Working Papers 2015-34, CEPII research center.

    More about this item

    Keywords

    financial intermediaries; mortgage; mortgage market; refinancing; regulation;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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