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.
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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.
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.