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Danish borrowers are offered interest-FREE mortgages


Danish homeowners are offered ZERO-interest fixed mortgages for 20 years

  • The fixed-rate loans are on offer from Danish branch of a Helsinki-based bank
  • Other lenders including Denmark’s largest bank are eyeing up similar offers 
  • Denmark’s central bank has had a negative benchmark rate for over eight years 

Danish homeowners are being offered interest-free mortgages as the country continues its policy of extremely low borrowing rates.  

The 20-year loans – with a fixed interest rate of zero per cent – are on offer from a Danish branch of the Helsinki-based Nordea Bank, according to Bloomberg

At least two other banks are planning to follow suit while the biggest lender in Denmark, Danske Bank, is also said to be considering the idea. 

It means that homeowners would only pay back what they borrowed – although banks may still impose fees and charges so that they make a profit. 

One of the benchmark rates set by Denmark’s central bank has been at minus 0.6 per cent for more than eight years, and the low rates have gradually filtered through to retail markets. 

Prospective homeowners in Denmark can get a 20-year mortgage at a fixed interest rate of zero per cent (pictured, buildings overlooking the old harbour in Copenhagen)

Prospective homeowners in Denmark can get a 20-year mortgage at a fixed interest rate of zero per cent (pictured, buildings overlooking the old harbour in Copenhagen) 

Denmark’s central bank became a ‘pioneer’, in the words of its governor Lars Rohde, when it cut one of its interest rates below zero in 2012.  

It was the first time this had happened in the bank’s 200-year history, but was seen as necessary to avoid a flood of capital during the euro crisis and preserve Denmark’s policy of keeping its currency at a fixed exchange rate to the euro.    

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Under a negative rate policy, banks and other financial institutions are required to pay interest for parking excess cash with the central bank.

This is meant to be an incentive for banks to use their money to lend more to businesses and consumers, helping to spur economic growth.

It also means that negative rates have gradually been passed on to savers, with Danske Bank last year introducing a rate of minus 0.75 per cent for large deposits. 

Now, borrowers are also set to feel a greater impact with the interest-free mortgages that became available from one of the lenders on Tuesday. 

A Danish bank previously offered a minus 0.5 per cent mortgage in 2019, meaning that the customer’s debt pile dropped by itself every month – although there were other fees and charges which meant the bank still made money.  

Other countries have considered negative rates to boost the economy, with the Bank of England saying last year that it would continue to assess the idea. 

The European Central Bank introduced negative rates in 2014, while the Bank of Japan went negative in 2016 to protect its export-heavy economy. 

Donald Trump has previously called for negative interest rates in the US, referring to the Federal Reserve as 'boneheads' for failing to implement the idea

Donald Trump has previously called for negative interest rates in the US, referring to the Federal Reserve as ‘boneheads’ for failing to implement the idea 

Donald Trump has also called for negative interest rates in the US, calling the Federal Reserve ‘boneheads’ for failing to implement the idea. 

But Fed chair Jerome Powell has continued to hold out against the policy even during the pandemic, saying last May that it was ‘not something we are looking at’.

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Denmark’s rate has remained negative all this time, and in a 2018 speech Rohde said the results had been ‘far less exciting or radical than some might have expected’. 

‘Basically, negative interest rates have just been a continuation of low rates,’ he said, while adding that the financial sector had been forced to adapt. 

The rate has also stayed negative during the pandemic, and was actually increased in March last year to protect the value of Denmark’s currency. 

Last June, Rohde said that Danish interest rates were likely to remain low ‘for a long time’.    

In the UK, average mortgage rates dropped to their lowest levels on record last May as the property market re-opened following the first lockdown.  



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