Denmark’s banks raise interest rates but many still remain negative

Nykredit is the first major Danish bank to stop charging customers to save — consumer advocates hope the others will follow.

Denmark's banks raise interest rates but many still remain negative
If you're saving up, this policy change could keep a few more kroner in your pocket every year. (Photo: Kristian Djurhuus/Ritzau Scanpix)

Since 2021, many major banks in Denmark have charged negative interest on personal accounts with a balance of more than 100,000 kroner. The policy has been a source of consternation to foreigners in Denmark, driving them (and their savings) to smaller banks including Lunar and Lægernes Bank that have a higher cap. 

But as of Friday, Nykredit, Denmark’s largest mortgage lender and bank to more than a million customers, has brought their interest rates back to black — barely. Moving forward, interest rates on personal accounts of all values will be zero. Arbejdernes Landsbank, with more than 300,000 customers, also pushed their interest rates up to zero on Friday. 

It’s cause for if not celebration, at least relief for foreigners in Denmark trying to save up larger sums of money, according to social media posts. 

Other banks have increased their rates, but they remain negative. On Thursday, Danske Bank, Nordea and Jyske Bank raised their interest rates half a percentage point from -0.7 to -0.2. 

READ ALSO: Danish (finance) word of the day: Udbetaling 

What it means for foreigners in Denmark 

Long-term savings can be something of a puzzle for foreigners who are only spending a few years in Denmark or don’t plan to stay through retirement age — depending on your circumstances, it isn’t always prudent to funnel your savings into your pension fund since early withdrawals and other factors associated with leaving Denmark can incur steep penalties.  

And since mortgage lenders often require substantial cash down payments — up to 40 percent — from foreigners looking to buy property in Denmark, the change in policy may be a boon to those trying to save up.

According to Finans Denmark, the average price of a 140 square meter house in 2022 is 2.8 million kroner, while the average 80 square meter apartment will set you back an average of 3.2 million kroner. With a very conservative down payment rate of 20 percent, that would amount to down payments of 560,000 kroner and 640,000 kroner.  

READ ALSO: Property sales increase in Denmark along with house prices 

Advocates say negative interest rates should end  

The Consumer Council (Forbrugerrådet Tænk in Danish) is pushing other major banks to go beyond their modest rate hikes and eliminate the negative interest entirely. 

“We are currently in a situation of great economic uncertainty, which many people are also feeling in their personal finances,” director Mads Reinholdt told newswire Ritzau. “That is why it is strange that the consumers who are sensible and want to save should be punished in this way.”

Why the change? 

On Thursday, the European Central Bank raised its interest rates in an effort to stem inflation, and the Danish National Bank followed suit — raising the interest rate from -0.6 percent annually to -0.1 percent annually. 

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Denmark uses new method to collect debt from public

Last year saw Denmark’s public debt collection agency Gældsstyrelsen collect a record amount from people with debts to the state.

Denmark uses new method to collect debt from public

A total of 12.6 billion kroner was collected last year according to the agency, which is a part of the Danish Tax Authority (Skattestyrelsen).

A new and more efficient recovery system, termed PSRM, can be credited for the amount, the agency said in a statement.

The system allows the agency to deduct from debitors’ wages and tax rebates in order to clear the debt.

“We have created a collection with strong resources to recover the debt,” Gældsstyrelsen director Anne-Sofie Jensen said in the statement.

“With our new system and our many skilled workers we are moving step by step in the right direction towards bringing down debt to the state,” she said.

Last year the system saw the tax authority bring in 5.2 billion kroner in overdue repayments.

The amount was notably lower in 2020, when it reached 2.2 billion kroner.

“The annual result shows that we are succeeding with our core task,” Jensen said.

“We are recovering a lot of the debt that public creditors have failed to demand from members of the public and businesses before the debt was transferred to us,” she said.

“But we are also aware that there are still challenges we must overcome in the coming years so we keep our working gloves on,” she said.

The amount of debt recovered by the state has increased year-on-year since 2016.

However, the total owed by individuals and businesses has also increased during that period.

That debt was estimated at 152 billion kroner in total in 2022.