The introduction of interest-only mortgages did not change that. However, interestonly mortgages may imply higher credit risk if households do not use these mortgages for other consolidation purposes. Further, studies by Danmarks Nationalbank documented that the introduction of interestonly mortgages could account for a significant share of the excessive house price development prior to the crisis.
17 The recommendation of the Council was for the government to change the statutory LTV limit in order to strengthen confidence in, and the robustness of, the Danish mortgage-credit model. The recommendation was issued at a time when the so-called Supervisory Diamond for Mortgage Credit Institutions was being drafted.