to a small degree. since 2004 the propensity to consume has shown an increase equivalent to approximately kr. 15 billion, while housing wealth has risen by kr. 670 billion. it is true that the capital gains have been further mortgaged, but the proceeds have mainly been used for home improvements or pension contributions, or invested in other financial assets. for more than 200 years we have had a secure mortgage financing system with a large, standardised mortgage - credit bond market that has given borrowers access on equal terms to finance real property at long - term interest rates in the capital market. however, in recent times the mortgage - credit system has undergone many changes : mortgage credit no longer comprises associations of borrowers, with members holding joint and several liability that join forces to gain access to a less developed capital market. today, the players are profit - maximising limited - liability companies in an economy with well - developed capital markets. mortgage - credit institutes and banks have become more closely connected in different ways. credit institutions from other eu member states can compete freely in denmark, and danish credit institutions have become active in financing real property abroad. finally, there has been considerable development of new products – for example adjustable - rate loans, capped adjustable - rate loans and deferred - amortisation loans. in this way, mortgage credit has become a product like other commercial financial products in an open economy with a mature financial system. this dynamic has not changed danmarks nationalbank's fundamental perception of the mortgagecredit system. danmarks nationalbank has always found it to be a secure system, beneficial for borrowers, lenders, the capital market, and financial stability. now a new type of covered bonds enters the market, called sdos. at the last annual meeting i called for a thorough review of the future regulations for use of sdos. i would like to acknowledge that this review has been undertaken, and there is now political agreement on a new act on sdos. overall, i believe this to be a good result. the bill also makes it possible for the mortgage - credit institutes to provide mortgage credit financed by issuing bonds in exactly the same way as today. danmarks nationalbank has considered this to be important. for some years the banks have competed with the mortgage - credit institutes to offer mortgage credit, among other things by introducing their mortgage loans. in addition, they also increasingly compete with foreign credit institutions – both in denmark and abroad. now the banks will have the

the future development in prices of owner - occupied homes have dampened, so that property is not bought chiefly to achieve a capital gain. the change of mood seems to have been most pronounced in the greater copenhagen area, and it is also in copenhagen that house prices have recently fallen, especially for owner - occupied flats. this reflects that prices per square metre have reached a very high level, and that the supply of newly - built homes has augmented. construction always reacts to rising house prices with a certain time lag. economic growth in greater copenhagen is still strong, however, and prices will be underpinned by the influx of new residents from the rest of the country. three quarters of denmark's owner - occupied homes are located outside greater copenhagen. in most areas, prices have risen more slowly, and price falls are less likely. the higher prices per square metre in recent years have strongly augmented housing wealth, which has increased by kr. 670 billion since the start of 2005. borrowing has also risen, but not by any means to the same extent. home equity has grown by an estimated kr. 550 billion over two years. this ensures that there is a significant buffer against any future price drops. rising house prices are first and foremost to the benefit of those of us that already own a home. the majority of the population are homeowners and this is probably one of the reasons that the high price increases have not provoked strong protests. stagnating and perhaps falling house prices will be to the benefit of first - time home buyers. for those who bought their homes when prices peaked any price drops will naturally be less welcome. however, only a small proportion of the owner - occupied homes changed hands at the very high prices. around 5 per cent of one - family houses in denmark are sold each year, so that for most homeowners a small price drop will just mean that a small part of the capital gain that emerged so quickly will disappear. the increase in interest rates moreover diminishes the market value of the outstanding debt, unless the home is financed at variable interest rates. danmarks nationalbank assesses that in the short term the slowdown in the housing market will have only a limited effect on the economy in general. once the construction backlog has been eliminated, new construction and conversion activity will probably dampen, but that is still far off, and furthermore, business construction is increasing. in addition, private consumption has only been affected by the increasing housing wealth