genius housing fix
Denmark Has The Solution To America's Broken Housing Market
In a cruel twist, millions of Americans are trapped in their homes by low mortgage rates. Denmark's housing market offers a tantalizing alternative.
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The Lede
The typical home loan in America is a gift. It's also a trap. When mortgage rates shoot up, as they did over the past two years, many would-be sellers decide they don't want to move after all. Many homeowners in Denmark, like their American counterparts, enjoy 30-year fixed-rate mortgages. But thanks to a quirk of their housing-finance system, Danish sellers are able to earn a profit when they trade in their low mortgage rates for more-expensive ones, making it easier to move even when rates rise.
Key Details
- During the pandemic, home loans were outrageously cheap. The typical 30-year mortgage rate plummeted to a record low of about 2.65% in late 2020.
- One estimate suggests the lock-in effect prevented more than 1 million people from selling their homes in the span of just a year and a half.
- These golden shackles are a problem only in America. Over the course of 2022, the typical rate for a 30-year mortgage in Denmark climbed by roughly 4 percentage points, the largest jump in 40 years.
