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Denmark offers homeowners 20-year loans at a fixed interest rate of zero

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Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero

#11

Post by throwaway-8c93 »

jcbrand wrote: post #2

House prices are driven upwards due to low interest rates, so this move will most likely only exacerbate the already high house prices. I'm not sure about Denmark, but in Germany house prices have about doubled in the last 10 years, (with the ECB insisting there's no inflation). Given the choice between high interest rates and cheaper house prices, versus low interest rates and expensive houses, I'd rather take the f…

> with the ECB insisting there's no inflation

House prices are represented in the consumer price index as 'imputed rent', generally by far the highest weight item. Last time I checked, its weight was at 9%.

Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero

#12

Post by frafra »

jcbrand wrote: post #2

House prices are driven upwards due to low interest rates, so this move will most likely only exacerbate the already high house prices. I'm not sure about Denmark, but in Germany house prices have about doubled in the last 10 years, (with the ECB insisting there's no inflation). Given the choice between high interest rates and cheaper house prices, versus low interest rates and expensive houses, I'd rather take the f…

You are right about the house prices in Germany, but your statement about ECB is not entirely correct.

ECB does not "insist there is no inflation" in Germany or in Europe: in both cases it has been around 2 % for the last 20 years: https://portal.dataviz.ecb.europa.eu/views/HICP_dashboard_ET...

There is a reason why the ECB estimation of inflation (HICP) seems lower than expected in your experience: it does not take into account owner-occupied housing (OOH) prices, which include O.1.1.1.1 (Purchases of new dwellings index). Mario Draghi (former resident of the ECB) was in favour of that, but the European Commission thinks that OOH is not suitable to be included in HICP yet.

References: - https://ec.europa.eu/transparency/regdoc/rep/1/2018/EN/COM-2... - https://www.ecb.europa.eu/pub/pdf/other/ecb.mepletter180615_...

Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero

#13

Post by pizza234 »

jcbrand wrote: post #2

House prices are driven upwards due to low interest rates, so this move will most likely only exacerbate the already high house prices. I'm not sure about Denmark, but in Germany house prices have about doubled in the last 10 years, (with the ECB insisting there's no inflation). Given the choice between high interest rates and cheaper house prices, versus low interest rates and expensive houses, I'd rather take the f…

I'm very skeptical at the following claim, if taken at face value:

> Germany house prices have about doubled in the last 10 years

In the capital, prices 10 years ago were extremely low. People who bought apartments between 10 and 20 ago bought them as low as 1000€/sqm, which is exceptionally low for a European capital.

Under such conditions, price doubling is expected independently of any policy.

Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero

#14

Post by leokennis »

I'm very far from an economist. But in school I learned banks loan out "your money" to companies, for which they receive interest, which they also use to pay you interest.

So when loaning money requires 0% of interest payments, and saving money pays out 0% of interest...that seems wrong?

Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero

#15

Post by the-dude »

BlargMcLarg wrote: post #10
jcbrand wrote: post #2

House prices are driven upwards due to low interest rates, so this move will most likely only exacerbate the already high house prices. I'm not sure about Denmark, but in Germany house prices have about doubled in the last 10 years, (with the ECB insisting there's no inflation). Given the choice between high interest rates and cheaper house prices, versus low interest rates and expensive houses, I'd rather take the f…

Same thing in the Netherlands. Prices doubling. The monthly costs are similar to years ago, but the high barrier to entry makes it impossible for young people to get anything similar to previous generations for the same money. As a result, rent goes up and young people now pay much more rent than before, semi-forced. Low rates do not help when the market is this overheated. Worse, disincentivising people from prematu…

Case in point : I owned a 300k house with my ex, we had a variable Euribor mortage taken out in 2004. With the Euribor at zero or below, the actual rate was close to 0.5%. Roughly translated to about €200 a month.

Now I am renting, a third of the space, for about three times the money ( maybe even more ).

Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero

#16

Post by Gwypaas »

ChuckNorris89 wrote: post #8
brtkdotse wrote: post #6

This is nuts. Housing inflation is rampant, I live in Sweden and my house value increased 40% in 5 years. We currently pay less per month for our 250 m2 house than my parents pay for their 75 m2 rental apartment.

Jesus, can yong folk afford to buy anything at this point?

Downward pressure and stability margins have been added recently by forcing people to amortize their loans, seemed to cool the market for a year or so until continuing to increase.

Loans above 70% of value needs to be amortized by 2% per year.

Loans above 50% of value needs to be amortized by 1% per year.

If your house loan is more than 4.5 times your yearly income, regardless of the percentage, then you need to amortize another 1% per year until below it.

This has of course made it even harder for young people to enter the market, but it seems to make for an overall more healthy long-term market in the current debt climate.

For many the hardest part is the by law required 15% down payment, this can be financed by private loans but that comes with it's own catches. Many instead end up relying on parents who has ridden the wave taking out a loan on their home, if you are fortunate enough to have home owning parents.

Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero

#17

Post by Codes »

jariel wrote: post #4

Can you say 'housing inflation'? All this does is introduce more monetary demand for housing, increases prices, and stretches out credit putting further distance between those with no homes, and those with the biggest. Housing may be one of the largest drivers in personal wealth in our era - the more you can afford for a down payment and payments, the greater your financial leverage over those with less leverage. And…

The inflation is only a problem in the biggest cities (eg. cph, Odense, Aarhus) In some parts of denmark the prices actually goes down (Southern jutland)

I live 80 km's from Aarhus and my house has only gained 7% in value over the last 6 years.

Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero

#18

Post by TeMPOraL »

leokennis wrote: post #14

I'm very far from an economist. But in school I learned banks loan out "your money" to companies, for which they receive interest, which they also use to pay you interest. So when loaning money requires 0% of interest payments, and saving money pays out 0% of interest...that seems wrong?

Any amount of belief I had that I understand any of this has evaporated when I learned that negative interest rates are not only a thing, but also a thing we may all enjoy soon enough, and that they're apparently a good thing.

Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero

#19

Post by firebacon »

BlargMcLarg wrote: post #10
jcbrand wrote: post #2

House prices are driven upwards due to low interest rates, so this move will most likely only exacerbate the already high house prices. I'm not sure about Denmark, but in Germany house prices have about doubled in the last 10 years, (with the ECB insisting there's no inflation). Given the choice between high interest rates and cheaper house prices, versus low interest rates and expensive houses, I'd rather take the f…

Same thing in the Netherlands. Prices doubling. The monthly costs are similar to years ago, but the high barrier to entry makes it impossible for young people to get anything similar to previous generations for the same money. As a result, rent goes up and young people now pay much more rent than before, semi-forced. Low rates do not help when the market is this overheated. Worse, disincentivising people from prematu…

The average price of existing houses in the Netherlands increased by 55% since 2013.

Source: https://www.cbs.nl/en-gb/news/2020/52/house-prices-almost-9-...

Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero

#20

Post by martin_bech »

jcbrand wrote: post #2

House prices are driven upwards due to low interest rates, so this move will most likely only exacerbate the already high house prices. I'm not sure about Denmark, but in Germany house prices have about doubled in the last 10 years, (with the ECB insisting there's no inflation). Given the choice between high interest rates and cheaper house prices, versus low interest rates and expensive houses, I'd rather take the f…

You are right, houseprices in denmark are going crazy..

But makes sense since 0% fixed mortgages.. you can get a 30year fixed at 0.5% with the option of only paying the interest, for the first 10years

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