**” Realkredit Danmark A/S continues to report steady prepayment levels in its Danish mortgage portfolio, with annual prepayments holding firm at approximately DKK 29 billion in recent years despite fluctuating interest rates and evolving borrower preferences toward fixed-rate and interest-only options. As of early 2026, periodic disclosures indicate ongoing but controlled early redemptions, reflecting a balanced housing market response to declining rates and stable credit quality. “**
Prepayment Dynamics in Realkredit Danmark’s Mortgage Portfolio
Realkredit Danmark A/S, a leading Danish mortgage credit institution and subsidiary of Danske Bank, maintains a substantial loan book primarily consisting of covered bond-funded mortgages. The company’s portfolio, which stood at DKK 795 billion at the end of 2024, experienced a nominal decline of DKK 12 billion that year, influenced by factors including competitive pressures from bank products and consistent prepayment activity.
Prepayments, or early redemptions of mortgage loans, remain a key metric for investors in Danish covered bonds, as they affect bond durations, cash flows, and overall portfolio performance. In the Danish system, borrowers benefit from flexible prepayment options, including penalty-free repayment at par for many fixed-rate products and the ability to refinance when market conditions favor lower rates.
Recent data shows prepayments have exhibited stability. For instance, annual prepayments amounted to DKK 29 billion in 2024, matching the level seen in 2023. This consistency persists even as broader market conditions evolve. Monthly announcements under the Danish Capital Markets Act continue to disclose prepayment figures, with recent releases in early 2026 indicating no dramatic spikes or drops in early redemptions as of mid-February.
Several drivers contribute to this pattern. Declining interest rates throughout 2024 and into 2025 prompted shifts in borrower behavior, with more customers opting for fixed-rate mortgages in the latter part of the period after initially favoring variable-rate products. Despite this, prepayment volumes did not surge significantly, partly because many borrowers had already refinanced in prior years when rates were higher, locking in longer-term arrangements.
The portfolio composition further contextualizes prepayment trends. Interest-only mortgages, which allow deferred amortization, accounted for 55% of gross lending in 2024, up from 50% the prior year, and represented 53% of new lending to owner-occupied dwellings and holiday homes. Overall, the share of mortgages with deferred amortization held steady at 48%. These features can influence prepayment incentives, as borrowers with interest-only loans may be more inclined to refinance or prepay when rates fall to optimize costs or extract equity.
In the personal market segment, lending to owner-occupied dwellings and holiday homes totaled DKK 413 billion at the end of 2024, down from DKK 426 billion the previous year, reflecting lower remortgaging activity (DKK 37 billion in 2024 versus DKK 40 billion in 2023). Gross lending overall decreased to DKK 87 billion from DKK 100 billion, underscoring a more cautious borrowing environment.
Key Portfolio and Prepayment Metrics
| Metric | 2024 Value | 2023 Value | Change/Notes |
|---|---|---|---|
| Total Mortgage Portfolio (nominal) | DKK 795 billion | DKK 806 billion | Decline of DKK 11-13 billion |
| Annual Prepayments | DKK 29 billion | DKK 29 billion | Stable year-over-year |
| Gross Lending | DKK 87 billion | DKK 100 billion | Reduced activity |
| Remortgaging Activity | DKK 37 billion | DKK 40 billion | Modest decrease |
| Interest-Only Share (gross lending) | 55% | 50% | Increase in preference |
| Deferred Amortization Share (portfolio) | 48% | 48% | Stable |
| Owner-Occupied Lending | DKK 413 billion | DKK 426 billion | Portfolio contraction |
Prepayments in Danish mortgage covered bonds are often tied to refinancing opportunities. When bond prices rise above par due to falling yields, borrowers can prepay at par, triggering proportional redemptions for bondholders. However, with average loan-to-value ratios remaining low (around 49% in recent assessments), credit risk stays contained, and prepayments have not led to outsized volatility.
Into 2025 and early 2026, the environment supported continued stability. The company’s strong financial performance, including a net profit of DKK 4,848 million for 2025, benefited from loan impairment reversals and cost management, indirectly supporting portfolio resilience. Expectations for 2026 point to normalized impairments and solid credit quality, with average LTVs likely to remain conservative.
Variable-rate products like FlexLån® maintained prominence, with refinancing intervals and green loan offerings (such as RD Cibor6® Green, totaling DKK 29 billion by end-2024) adding layers to borrower options. Yet, the lack of aggressive prepayment surges suggests borrowers are adapting without mass early exits.
Overall, Realkredit Danmark’s prepayment profile reflects the strengths of the Danish mortgage model: high transparency through regular disclosures, borrower flexibility balanced by institutional stability, and a market responsive to rate changes without extreme disruptions. Periodic updates confirm that prepayments remain manageable, aligning with broader trends in a gradually easing rate landscape.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, investment recommendation, or solicitation. Mortgage and bond markets involve risks, including interest rate, credit, and liquidity risks. Readers should conduct their own research and consult qualified professionals before making decisions.