Outlying regions of Denmark are being faced with an added problem connected to the ailing housing market.

Mortgage institutions are in general refusing to finance properties that cost DKK500,000 or less, despite the fact that the property market has been in a free fall and there are an increasing number of properties that have dipped below the apparent cut-off price.

Some 2,000 properties, predominantly in outlying regions, are currently for sale below the 500,000 mark. Five hundred of them are in North Jutland, where buyers can be forced to take out expensive bank loans to finance their purchase.

“I am shocked. We are trying to get people to come here because housing is good and cheap. So it’s strange that the mortgage institutions should impose this sort of selection process. It puts further pressure on us at a time of a difficult crisis,” says Morsø Mayor Lauge Larsen.

Larsen’s colleague in Hjørring, Mayor Arne Boelt, says the situation is a vicious circle. “The mortgage institutions are not meant to be kings and decide where people should live,” Boelt says.

“The government must do something about this and soon,” says Niels Christian Nielsen of the University of Southern Denmark, who adds that while the institutions did not create the problem in outlying regions, they are making the situation worse.

Urban, Housing and Rural Minister Carsten Hansen is currently trying to formulate a policy that will give incentives to rural and outlying areas.

“It is unfortunate that the crisis has hit some of our rural districts very hard. The government’s priority is to change the situation by regenerating growth in rural areas as well. If that happens, it will be attractive to move there. That in turn will help solve the problem of difficulties in financing cheaper properties,” Hansen says.

The mortgage institutions themselves accept that financing properties below DKK500,000 will be an increasing problem.

“It’s a case-by-case decision. But it is correct that it is difficult to finance properties of DKK500,000 and below because this is where the institutions lose most,” says Realkreditforeningen Director Karsten Beltoft.

“I would like to be the nice, friendly guy who could help everyone. But our institutions are duty bound to maintain a good and safe mortgage system. And you do that, among other ways, by refusing to lend when the risk of loss is too great,” Beltoft adds.

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