Lender to launch Denmark's cheapest ever mortgage

The Local Denmark
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Lender to launch Denmark's cheapest ever mortgage
Properties for sale at an office of the Danbolig estate agency. Photo: Mathias Løvgreen / Ritzau Scanpix

Mortgage provider Realkredit Danmark will next week start offering Denmark's cheapest ever 30-year mortgage, with an interest rate of just 0.5 percent per year.


The fixed-rate 30-year loan is the lowest interest mortgage ever seen in Denmark, and is likely to be matched by Realkredit competitor Nordea Kredit.  
Christian Hilligsøe Heinig, Realkredit's chief economist, said that current rock-bottom interest rates reflected the persistent low interest rates across the world, and the still sluggish global economy.  
"The primary explanation is the uncertainty surrounding the economic recovery, and the uncertainty over the escalation of a trade war between the US and China," he told The Local. 
Heinig said that the loan would be available to foreigners living in Denmark so long as they were either long-term residents able to buy property or had been granted permission to buy property by the Department of Civil Affairs (see guidelines here). 
"If you're buying a Danish property you can get access to a Danish mortgage loan. The determining point is that it's for Danish housing," he said. 
At Nordea Kredit, chief analyst Lise Nytoft Bergmann told the Berlingske newspaper that the historically low mortgage rates would be good for homeowners. 
"It's great news for homeowners who can borrow money at an incredibly low rate of interest, but it's hardly so gratifying to investors who find it difficult to put their money in a safe place without suffering a loss after inflation," she said. 
Danmarks Nationalbanken, Denmark's central bank, has held its main lending rate at 0.05 percent since January 2015
Heinig conceded that in the long run there was a danger that the low interest rates would lead to a housing bubble, but he said Realkredit believed that the Danish market was not currently overvalued. 
"The risky part of these very low interest rates is that prices on the stock markets, bond markets and property market will rise more than fundamentals can support," he explained. 
"But we have also seen a lot of financial regulation over the past few years, which means that the effect of very low interest rates is limited compared to earlier periods, and looking at the Danish market, we don't see any signs of a price bubble." 
Even in Copenhagen, he said, prices relative to earnings were below where they had been in the years running up to the 2008 financial crisis. 



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