Key Post The Mortgage System in Denmark


Frequent Poster
I think this part is important in Charlie's article.

Lenders act as brokers between borrowers and investors, generating income from fees, not interest rates.
In many EU countries banks charge a fee for mortgage origination which you pay back over the course of the loan.

This isn't allowed in Ireland (not sure why). But is on reason (not the main one) why rates will be higher.

Brendan Burgess

Hi Coyote

I think you are conflating two different things here.

In Ireland and most countries, the bank lends you money.
In Denmark, the bank does not lend you money - the loan comes from the savers directly to the borrower. The bank charges an ongoing fee for administering the loan.

In Ireland, if the borrower does not repay, the bank loses.
In Denmark, if the borrower defaults, the savers lose. The system is designed to protect savers so repossession is fast and efficient and defaults are few.

In Ireland, some lenders do charge application fees for originating loans.
Application Fee
0.5% of the loan amount. This is capped at €1,500 for individual Buy-to-Let Investors.


Frequent Poster

Are we comparing "like for like", when we compare mortgage costs in Ireland, with Denmark? I don't think we are.

The fees that Mr Burgess has mentioned above, paid by Danish borrowers, are a notable cost, and needs to be considered. So, it's not just, or fair, to imply that Danish homeloans are essentially "free".

... I also find myself wondering just how many Irish savers would be happy to see theirs savings put at real risk, by being used to fund homeloans?

Secondly, are Danish Banks compelled to meet the same liquidity and solvency ratios, and to the same levels, as Irish Banks?

.... There is absolutely no doubt that there is a notable cost in maintaining High Quality Liquid Assets, in the current economic climate. Is the requirement too high, perhaps? That's one for the Central Bank to deal with, rather than individual Banks... but does impact on the cost of an Irish person's mortgage.
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