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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Danish government returns debt payments from 138,000 people 

Around 138,000 people in Denmark have been unable to repay debts to the Danish state in 2022 after money they paid was refunded.

Danish government returns debt payments from 138,000 people 

From January to October 2022, 138,000 people in Denmark trying to square their debts with the government were refused due to confusion about whether the Danish Debt Collection Agency (Gældsstyrelsen) actually has the right to receive it, newspaper Berlingske reports.

Having a debt to the Danish public sector on your books can have serious financial consequences, including jeopardizing your eligibility to secure a mortgage.

Data from the Debt Collection Agency indicate the number of debts considered “not ready for recovery” has increased by 1.5 million this year. Half of those debts are connected to the Danish Tax Authority (Skattestyrelsen). 

In total, the 138,000 people were refunded 121 million kroner, including 17 million kroner in unpaid interest. That works out at an average refund of 750 kroner per person.

Based on the scale of the problem, the government will have to consider cancelling some of the debts, Peter Bjerre Mortensen, professor of public administration at Aarhus University, tells Berlingske. 

“They need to swallow some very big camels and/or simplify some legislation or forgive some debts, because right now it seems that things are still going the wrong way with regard to collecting public debt,” Mortensen said. 

The issues with ‘unpayable’ debts first arose in 2015 when EFI, the IT system Skat used to collect debt, was shuttered, according to Berlingske.

Debts to the Danish state have been growing since then. The parliamentary ombudsman said earlier this week that he would try to find out why individuals have been unable to repay debts.

“The ombudsman has received complaints from several members of the public and there have been articles in the media about people who could not repay their debt to the state,” wrote the ombudsman, Niels Fenger.

Tax minister Jeppe Bruus has previously recognised the issue with the repayment system.

“This is a huge challenge and something that must be worked on and improved,” he told newspaper Jyllands-Posten in September.

READ MORE: ‘Topskat’: What is Denmark’s high income tax bracket?