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Interest rate cuts lead to new Danish ‘super loans’

As a knock-on effect of the Danish central bank’s repeated interest cuts defending the krone’s link to the euro, Danish homeowners are now being offered historically low mortgage loans.

Published: 6 February 2015 14:29 CET
Interest rate cuts lead to new Danish 'super loans'
Photo: Martin Ballund/Scanpix
Nykredit bank announced on Friday that it is creating a new 30-year mortgage loan with just 1.5 percent interest. Realkredit Danmark and BRF quickly followed with their own 1.5 percent loans. 
 
The move came one day after Nationalbanken cut its interest deposit rate — for the fourth time in less than three weeks — by 0.25 percentage points to -0.75 percent.
 
“Nationalbanken is turning the knobs on interest rates to defend the krone exchange and that is benefitting Danish homeowners and businesses,” Nykredit’s Sune Worm Mortensen told TV2 Finans. 
 
It was just a few weeks ago that Danish banks began offering two percent loans, which according to financial daily Børsen has set off the biggest loan conversion rush in a decade. 
 
“We can see that the interest fall is continuing. And we could very well see that on the two percent loans today,” Mortensen told Børsen. 
 
But even though the bank is now offering 1.5 percent loans, Nykredit is recommending that borrowers stick to the two percent loan so long as its market value doesn’t exceed 100. 
 
Nykredit expects that the new 1.5 percent loan will open with a market value of around 96.5 but warns that it could climb higher as a result of Nationalbanken’s latest cuts. 
 
Danish interest rates are determined by the supply and demand of the bond market. According to the Association of Danish Mortgage Banks (Realkreditrådet), “this is unique by international standards and doesn’t form part of the mortgage system of any other country in the world.”
 
The Association of Danish Mortgage Banks has a short film that explains Denmark’s mortgage system that can be viewed here. 

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SWISS ALPS

Why luxury Swiss mountain resorts are becoming ‘lifeless’

Properties are expensive — and getting even more so — in many parts of Switzerland. But the situation is especially dire in chic mountain resorts, where the cost of holiday apartments has soared substantially. This is having an impact on the local population.

Published: 29 May 2024 15:25 CEST
Why luxury Swiss mountain resorts are becoming 'lifeless'

In the past several years, the already pricey holiday homes in the Swiss Alps have become 30 percent more expensive, according to a new UBS report analysing 140,000 properties in the mountain resorts of Switzerland, France, and Austria.

Swiss towns, however, are the most expensive of the lot, having taken nearly all the top spots in the ranking.

Verbier, in canton of Valais,  is in the first place — the price for a square metre of living space in this resort town now costs over 21,500 francs.

St. Moritz in Graubünden is a close second (21,200 francs for sq/m), followed by Zermatt (19, 900), Gstaad (19,700), and Andermatt (18,000).

By comparison, the per-square-metre price (in Swiss francs) in the most expensive ‘foreign’ resort — Kitzbühel, Austria — is 16,200, and in the highest-priced French resort, Courchevel, 13,500.

Mountain villages are certainly picturesque and offer many skiing and hiking opportunities for sports enthusiasts, but these are not the only reasons for the influx of well-heeled residents.

This trend took off during the Covid pandemic, when numerous city dwellers wanted to escape farther away into the ‘nature’ and be able to work from home.

What does this all mean?

Getting a top franc for their property is enticing to many homeowners, who can cash in and make a good profit.

And having affluent taxpayers move in boosts local economy, which means that everyone living in the community benefits at the end.
 
“This generally supports the municipal finances which, in turn, raises the scope for infrastructure investments and thus increases the attractiveness of a destination for second home owners,” UBS said in its report.

However,  like the proverbial double-edged sword, high property prices also have a negative side.

For instance, as the wealthy move in and prices go up, the lower and middle-class people who may have lived in these mountain communities for generations — running local shops, restaurants, ski lifts, and other essential businesses — can no longer afford to live there and are forced to move out.
 
While there are no official statistics  showing how many people move away from these resorts for financial reasons, anecdotal evidence indicates this phenomenon does exist. 

One of many such testimonies comes from Graubünden’s Engadin region. 

“Locals have sold historic Engadin houses to wealthy owners, who in turn converted them and used them as holiday homes, becoming popular retreats that are often empty in the off-season,” according to Anna Florin movement, which encourages villagers to withstand the pressure from the real estate agents to sell their properties.
 
 “Life in the village is therefore dwindling or disappearing completely.”

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