With Denmark’s housing market booming, homeowners face the crucial decision of which mortgage to choose. Experts weigh in on the best loan options for different financial situations and risk tolerances.

Two out of three experts favor a variable-rate loan, specifically the F-kort (short rate) loan, citing its current low interest rate and potential for further decreases. Brian Friis Helmer, a private economist at Arbejdernes Landsbank, highlights that the F-kort’s interest rate has fallen the most in the past year, making it significantly cheaper compared to fixed-rate loans. Ann Lehmann Erichsen, a consumer economist at Sydbank, agrees, stating she would choose this loan to borrow as cheaply as possible, particularly if not planning to repay it.

However, the F-kort loan isn’t without its risks. Helmer cautions that borrowers only know their interest expenses for six months at a time and face a higher contribution rate with no option for upward or downward conversion. He emphasizes that this loan requires a robust financial situation and is not suitable for everyone, especially first-time buyers with limited down payments.

Mikael Mogensen, a senior economist at Jyske Bank, offers a different perspective, recommending an F3 loan, which adjusts interest rates every three years. He believes the potential for further interest rate falls on short-term rates is limited and already factored into the F3 interest rate. Mogensen also notes the significant difference between the F3 interest rate and the fixed interest rate, making the F3 loan an attractive option for borrowers willing to take on a shorter interest rate binding.

Despite the current appeal of variable-rate loans, Mogensen outlines four reasons why borrowers might still choose a fixed interest rate: anticipation of rising interest rates, anxiety about interest rate fluctuations, inability to afford interest rate increases, or failure to qualify for a loan with a very short interest rate binding.