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 gives cash to 400,000 households hit by energy costs

A cash payout of 6,000 kroner was sent to around 400,000 households in Dennmark on Wednesday in a measure intended to relieve people struggling with high energy costs.

Denmark gives cash to 400,000 households hit by energy costs

The one-off payouts, which were agreed by parliament in March, were sent on Wednesday to over 400,000 households which meet the criteria set to receive the relief.

“We hope that this outstretched hand of 6,000 kroner will be a helping hand in a difficult time for Danes who are finding it hardest of all due to increasing heating prices,” the minister for climate, energy and critical supplies, Dan Jørgensen, said in a statement.

All residents of Denmark are eligible to receive the payments, provided their household meets the relevant criteria – not just Danish nationals as could be inferred from Jørgensen’s statement.

“It was important for the parties behind this agreement to help in a way that could be felt and in a targeted way. We think this cash will make a difference,” he said.

Households with a collective pre-tax income of under 706,000 kroner are eligible for the one-off cash boosts, which are costing the government 2.4 billion kroner.

Additionally, the household should be primarily heated by individual gas heaters, electronic radiators or be located in a district heating area in which the heating is produced by at least 65 percent gas.

Eligible houses do not have to apply for the cheque and will receive the payment automatically to their designated account (Nemkonto). In households with more than one person, the oldest member of the household receives the payment.

Errors in registration data can result in households which meet the criteria not receiving payments automatically, according to the Danish Energy Agency. People who believe that their household meets the criteria, but have not received the money, will be able to apply for it to be sent to them at a later date. Application will be possible from January 2023. 

Jørgensen said on Wednesday that the government did not expect any further cash payouts to be made to homes heated by gas. Instead, the government’s focus is to move away from dependence on gas as an energy source.

“Before the summer holidays we made a plan that ensures we phase out gas as a heating source, he said.

READ ALSO: Denmark announces major plan to replace gas heating in homes