Denmark’s central bank warns of risky housing loans

COPENHAGEN (Reuters) – Danish homeowners are increasingly opting for more risky loans, the central bank warned on Thursday as it repeated earlier recommendations for tighter lending rules.

“The many loans with deferred amortisation are a structural problem because they make homeowners more vulnerable to a later drop in house prices,” the central bank said in its biannual financial stability report.

A stress test conducted by the bank showed that some large credit institutions come close to breaching their capital buffers requirements in the case of a “severe recession”.

“They therefore need their current excess capital to withstand stress,” the central bank said.

(Reporting by Stine Jacobsen and Nikolaj Skydsgaard, editing by Terje Solsvik)