Inquiry: Financial Requirement for Home Purchase in Denmark by 2025, Unveiled on a Map
Headline: Mortgage Approval Becomes More Accessible for First-Time Buyers Across Most of Denmark
In a positive turn of events for first-time buyers in Denmark, banks have become more willing to approve mortgages over the past year. This trend, driven by declining interest rates on mortgages, has made life a little easier for many aspiring homeowners across the country.
The calculations assume that 15 percent of the purchase is financed through a bank loan and 80 percent through a 30-year, fixed-rate loan at 4 percent. Under this scenario, a typical household could expect to have 16,900 kroner left over each month after housing expenses to cover food, everyday purchases, holidays, and leisure.
However, the story varies depending on location. In Aarhus, around 6,000 kroner more than in 2024 would be needed to secure a mortgage, amounting to approximately 946,208 kroner. The trend of rising house prices is more pronounced in Copenhagen, where a whopping total household income of 1,928,924 kroner is needed to get a mortgage, some 305,800 kroner more than last year.
On the bright side, a number of increasingly desirable towns, including Vejle, Herning, and Skanderborg, have become more accessible for mortgage approval. Meanwhile, each of the 18 municipalities in which it has become harder to get a mortgage are in the Greater Copenhagen area.
Jeppe Juul Borre, senior economist at Arbejdernes Landsbank, stated that the rate cuts and rising wages more than offset the increase in house prices in some areas. If you want to buy a house in Vejle, you'll need an "average" household income of 790,888 kroner, which is 2,600 kroner less than last year.
Regarding housing affordability, the house price to income ratio in Denmark slightly increased in 2023 after a decline in previous years, indicating housing became marginally less affordable. Despite the price correction, mortgage interest rates have soared, increasing the cost of credit and impacting affordability more than income-to-price ratios alone suggest.
While precise regional breakdowns of income needed for mortgage approval in 2025 are not available, the minimum annual salary related to the Pay Limit Scheme in Denmark for 2025 is DKK 514,000, up from DKK 487,000 in 2024. This increase aligns with the slightly increased house price to income ratio, implying an increased income need compared to the previous year.
In conclusion, the mortgage landscape in Denmark is evolving, with more opportunities for first-time buyers in most parts of the country. However, the rising house prices and interest rates necessitate higher incomes for mortgage approval, particularly in urban areas like Copenhagen and Aarhus. The general upward trend in minimum salary requirements suggests that home buyers should prepare for increased financial requirements in 2025.
In light of the increased mortgage approval rates, some first-time buyers may find investing in real-estate a viable option for personal-finance growth. However, the high demand for houses in urban areas such as Copenhagen could drive up the cost of real-estate investments.
Meanwhile, the increasing minimum annual salary requirements for mortgage approval underscores the importance of managing personal-finance wisely, especially for those seeking to buy a house. Keeping an eye on trends in news and finance, such as mortgage rates and house prices, could aid decisions related to personal-finance planning and investing.
Moreover, the escalating cost of credit due to soaring mortgage interest rates highlights the need for careful budgeting and strategic financial planning, including potential diversifications in personal investments, such as art or other assets, to offset potential risks in the real-estate market.
