Homeowners' budgets and debt servicing capacity projections

We assess the solidity and debt servicing capacity of Danish homeowners by simulating the impact on household budgets of inflation, rising interest rates and a potential unemployment shock, and calculating the remaining economic margin. A negative economic margins means the household would not have been able to obtain its current debt from a credit institution. Rising interest rates and inflation will increase the number of households with a negative monthly margin by 36,000 (3.4 per cent of homeowners with mortgages) by the end of 2023. An additional 55,000 will see their margin reduced by at least 20 per cent. While the budget effect of unemployment is mitigated by unemployment insurance and spousal income, the margin of three out of four affected households will become negative or decrease by at least 20 per cent. Overall, we show that household budgets are tighter in sparsely populated municipalities and for highly indebted households.