9 ms·
If you are a foreigner living in Denmark, it is really hard to get mortgage loans due to unexplainable risks. (e.g. They don't tell you why you are in a risk gr
by m00dy 6y ago
If you are a foreigner living in Denmark, it is really hard to get mortgage loans due to unexplainable risks. (e.g. They don't tell you why you are in a risk group. )
Anyway, the maximum amount of deposits is now around 4 months of wage. So, I hardly see the necessity to have a bank account or banking infrastructure.
I wish I could join "We don't need banks anymore" motto. But now, It looks like It is becoming a reality.
- lifty 6y agoYou shouldn’t have savings. You should spend it to help the economy /s
- DangerousPie 6y agoThis but without the /s.
- m00dy 6y agoThis is not my first time that I hear about this. Two of my danish friends told me exactly the same without /s :). Why shouldn't I have savings ?
- lifty 6y agoSavings are a drag on the economy. It’s negative aggregate demand and we can’t have that. While I don’t have any proof, I have a feeling that the negative rates environment is making people even more scared of spending money.
- gruez 6y agoIt's hard to tell whether something's sarcastic or sincere in this thread, but on the off chance that you are sincere: >Savings are a drag on the economy Savings don't sit in a vault somewhere. They get reinvested into the economy, providing capital.
- lifty 6y agoMy previous statement is not sarcastic but should also not be taken as fact. It’s more like theory and I doubt we know how far it strays from reality. Yes savings get invested but not all money flows are equal. For example, stock buybacks might have a lesser impact on economic velocity compared to consumption spending.
- RobertoG 6y ago>"Savings don't sit in a vault somewhere. They get reinvested into the economy, providing capital. " No they don't. Savings is only a number in a computer and lending is not limited to the available savings because private banks create money when lending. So, the quantity of savings have not effect in how much financial capital can be invested in the economy. Private banks don't lend reserves (or savings), instead, they lend when makes business sense and then search for reserves in the system. Central banks will accommodate any need of reserves in the system in order to keep the interest rate in their choose range. Edit: I see I get some down-votes, maybe people is more willing to believe 'forbes' or the Bank of England that some random guy in the internet: https://www.forbes.com/sites/francescoppola/2014/01/21/banks-dont-lend-out-reserves/ https://www.forbes.com/sites/francescoppola/2014/01/21/banks... https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
- csomar 6y ago> Central banks will accommodate any need of reserves in the system in order to keep the interest rate in their choose range. I think they are required to keep 10% reserve. Unless this changed very recently?
- RobertoG 6y agoIt has not changed, the problem is that the normal narrative has the causality wrong. The explanation we get is this: private banks have a quantity of reserves and they can lend only what the money multiplier allows them. So, they are limited by the quantity of reserves they have. If that were true, they would be limited by the quantity of savings in the system. But in reality it works the other way around. Banks lend first (hopefully only when makes business sense to lend) and then they search for reserves. A bank lend (creating money in the process) and, after the fact, if it doesn't have enough reserves already, it tries to get the reserves from other banks (inter-bank market). This is a legal requirement, so, they have to get those reserves. This creates an offer-demand dynamic between banks that move the interest rate up or down. If the quantity of reserves was fixed, that would be the end of it, but, because Central Banks have a target interest rate that they want to keep (but not a money quantity target), they have to accommodate the quantity or reserves in the system reacting to the inter-bank market dynamics. Adding or retiring reserves as necessary to keep the interest rate that they want. The central banks control the interest rate, but that means they can't control the quantity of money in the system. The quantity of money is determined by the demand of credit from the economy (and not by the available savings). If we understand this, we see that private banks are not limited by savings in their lending capacity, they are limited by how many business or households are requesting credit (and if those request make business sense for the bank). This is a good reading about those subjects: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
- imtringued 6y agoNot all savings are created equal. Savings can be invested, the problem is with savings that nobody invests. Excess savings are a drag on the economy because they fail to employ anyone, nor do they result in productive work (borrowing money for dividends or stock buybacks is not productive, just a shell game).
- rawtxapp 6y agoYou need to be a slave to the system, always chasing the next shiny thing, who will bankroll useless material consumption otherwise? People don't save for rainy days and when things go south, everything collapses and the system is too fragile.
- bildung 6y agoPeople in Denmark collectively save for rainy days, which is a pretty efficient solution.
- imtringued 6y agoYou got it backwards, nobody should be a slave to the system. Consumption doesn't have to be useless material consumption, you can consume responsibly the same way you can do anything in life irresponsibly or responsibly. For example, planting a tree is consumption, building a house is consumption, capturing CO2 is consumption.
- rawtxapp 6y agoI already have everything I need, what should I consume next? Those examples are not consumption, they are investments for the future and are arguably a net positive and a saving's mechanism by themselves (saving the planet, your living condition, etc).
- 0xfaded 6y agoBecause Danes have generous pensions partly funded by foreigners who somewhat reliably leave the country after a number of years.
- throw0101a 6y agoAnd the foreigners can often use their time in Denmark as contribution credit to their own social security. Canada for example has a few such agreements, include with Denmark AFAICT: * https://www.canada.ca/en/revenue-agency/services/tax/canada-pension-plan-cpp-employment-insurance-ei-rulings/cpp-ei-explained/canada-pension-plan-employment-insurance-explained-13.html https://www.canada.ca/en/revenue-agency/services/tax/canada-... * https://retirehappy.ca/social-security-agreements-cpp-oas/ https://retirehappy.ca/social-security-agreements-cpp-oas/
- AdrianB1 6y agoThere may be a few exceptions, but that is not the rule.
- simongray 6y agoYou mean all those expats that only have to pay half the income tax that Danes do? If you're only here temporarily as some kind of specialist it's hardly like you're being robbed. If you decide to stay for the long haul, obviously you are expected to also contribute your fair share to the welfare system. https://skat.dk/skat.aspx?oid=2244911 https://skat.dk/skat.aspx?oid=2244911
- DangerousPie 6y agoThere is nothing wrong with having savings but right now pretty much every government in the world is trying to encourage consumer spending to get the economy going again. And the way they do that is by making the alternative (saving) less attractive.
- imtringued 6y agoYou should have as many savings as the economy demands, right now it demands very little savings. The best choice would be to increase the demand for savings but that would require consumer spending, which then increases demands for investments which increases demand for savings.
- wait_a_minute 6y agoNah
- throw0101a 6y agoYou should have an emergency fund. After that you should be investing for retirement, or any other larger goals you may have, e.g., home ownership, replacing car. But having a pile of money beyond those things "just because" does not really serve the purpose of money: as a medium of exchange for goods and services. Money in itself is not useful, it is only useful for the things it can give you: shelter, water, food, and the various other things as you work your way up Maslow's hierarchy. At most having a (digital) pile of cash may help you sleep at night (assuming it's covered by deposits insurance). Paying a fee may be worth peace of mind.
- brokenkebab 6y agoAnd can you really define where this beyond lies? You know, emergencies costs variance is huge, and home ownership too. Also, "piling" money in a bank account doesn't remove money from economy.
- Iv 6y agoIt removes it from the demand side of the economy, which, in period of low interests, is the part you want to boost.
- makomk 6y agoThe demand side of the economy doesn't seem to be the problem right now. There's enough demand that there's shortages and price increases for almost everything at this point.
- Iv 6y agoThe shortages seem to be caused by hiccups in the cupply-chains bottlenecks that have a hard time to adjust to the slowdown and recovery of the economy. It is not caused by a unusually high demand, but compared to its depressed self six month ago, it is comparatively high. Interest rates are still very low. There is still a strong case to argue that the demand is lagging.
- 6y ago
- imtringued 6y agoActually, this is too simplified. You're supposed to either invest your savings (investment in the amazon sense, use money to grow a business) or spend it. Bank deposits are a form of investment, assuming borrowers invest on the behalf of lenders, something which isn't happening, indicated by negative interest rates. If neither investment nor spending happens, then excess savings occur which are savings that are simply doing nothing. Excess savings are bad for the economy because they break the investment = savings equation. If one person earns more than they invest/consume, then some other person must consume/invest more than they earn. The negative interest is mostly aimed at companies that are hoarding money. The current increase in the household savings rate is a reversal of that trend and it is actually a good thing because it puts even more pressure on companies to do productive investments. As it is right now, the bottom 90% of consumers shouldn't feel bad about having savings.
- sharpneli 6y agoDo the mortgages also have a negative interest rate or are they cappoed at 0?
- deleted 6y ago[deleted]
- razius 6y agoCapped at 0 and you pay all kinds of fees on top.
- dusted 6y agoSome actually do
- boublepop 6y agoYes, but there are costs associated which when included in calculations brings them back up over zero.
- jopsen 6y agoI was looking at mortgage for a house, paying 30% upfront, so I would only need to borrow 500k USD. At fixed rate 30yr, it was 1% + some fees.. so total cost of the loan over 30 years would be 35k USD. The flex interest rate (adjusted every 5 years) was a current rate -0.25 + fees. In total that would cost around 10k USD over 30 years. (Of course with flexible interest rates, the rates could go up). So I think most of the cost is now just fees... Looking at owning vs. renting it's quite competitive.
- dkarras 6y ago>Anyway, the maximum amount of deposits is now around 4 months of wage. Sorry, I don't get it. What if you have ...shudder... more money?
- Kosirich 6y agoIf you are a foreigner living in Denmark, it is really hard to get mortgage loans due to unexplainable risks. You are somewhat right so I think it needs to be clarified to non Denmark living people that it has nothing to do with banks and all about Danish government regulation. They have specific laws that look differently on foreigners depending if they are EU, non EU, living for 5 years in Denmark, living less than 5 years. I think what OP might refer to is that he comes from a specific non-EU country that Danish system doesn't look kindly on. (check the recent changes in the way citizenship is granted to read more about it) If you are EU and if you have stayed more than 5 years in Denmark you should have no trouble getting mortgage. Basically also if you are non-EU if you have been in Denmark continuously and hold permanent residence. If you are EU citizen you can get a house and mortgage immediately if you have 5% (or better 20%) but in case you leave Denmark you won't be able to rent it. (as I remember correctly). Current mortgage rates for 20 years are around 1% if you deposit 20% of house value. Most of the time if you are looking to buy something that hasn't skyrocketed in value, you will be paying the same (with taxes) as you would the rent equivalent. (aka if you can, go for mortgage)
- m00dy 6y agoI'm sorry to say that I have no intention to escalate this thread. So, I will not reply to your arguments.
- Kosirich 6y agoI wasn't trying to argue as much as summarize, perhaps to quickly, the Danish housing market. Sources of information is my personal experience and experience of few (4) other couples that bought their houses within last 2 years.
- pc86 6y agoNot a Dane; 1% is very low compared to where I am, which is about 2.7% for 20 year. Is that subsidized by the government at all or just a different market?
- Kosirich 6y ago
- BlueTemplar 6y ago> it is really hard to get mortgage loans due to unexplainable risks. (e.g. They don't tell you why you are in a risk group. ) Wait, isn't this illegal ?
- imtringued 6y agoNegative interest rates are impossible because people will withdraw cash or purchase cash equivalent assets like government bonds (the seller of the bonds may have to hold onto cash).
- kseistrup 6y agoExplain that to the Danish banks.