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Danske Bolig Fri loan popular with families with children – now it is possible to lock in the interest rate

Danske Bank now offers Danish home owners a new possibility of protecting themselves against the risk of their loan becoming more expensive. Today, we are launching a Danske Bolig Fri loan with the option of locking in the interest rate for one to ten years. The loan is a competitive alternative or supplement to mortgage loans.

Danske Bank’s Danske Bolig Fri loan is increasingly used as a supplement or competitive alternative to mortgage loans. So far, the loan has been intended only for customers seeking very short interest periods with refinancing every three months, but home owners wanting to protect themselves against higher interest rates can now choose to lock in the interest rate for up to ten years.

This is a unique offer in the market. We expect that it will contribute to increased competition on home loans since we now also have a bank product that is a competitive alternative for home owners wanting to know exactly what they have to pay in interest.

Lars Alstrup

Head of Commercial Excellence, Denmark at Danske Bank.

Many home owners combine mortgage and bank financing
An increasing number of customers have become aware that the Danske Bolig Fri loan may be a strong supplement or alternative to a conventional mortgage loan. Two out of three loans are supplementary loans, so many home owners opt for a combination of mortgage and bank financing.

One of the strong features of Danske Bolig Fri is the flexibility it offers. Borrowers can always repay the loan at par at no cost and make extraordinary repayments. At the currently low level of interest rates – with deposit accounts earning hardly any interest – this is an attractive option for many.

Seven of ten Danske Bolig Fri customers are families with children
“Our bank home loans are particularly popular with families with children,” says Lars Alstrup.

“Today, seven out of ten loans are raised by such families. This is unquestionably because of the built-in flexibility, which is great to have, especially for families with children. Some years families may be able to repay more, and other years – for example, if their children go to an independent residential school for lower secondary students or are being confirmed – there is less room in the budget for repayment. And this is where the bank loan offers the flexibility needed.”

An individual assessment must always be made 
Customer needs, preferences and financial circumstances vary. So an individual assessment must always be made to determine whether a conventional mortgage loan, a Danske Bolig Fri loan or a combination of the two types is the best option for a given borrower.

Facts about Danske Bolig Fri

  • Danske Bolig Fri is a variable-rate bank loan secured on real property.
  • The interest rate on the loan is set each quarter on the basis of the CIBOR-3M rate.
  • Possibility of locking in the interest rate for up to 10 years – a margin is this added to the CIBOR 3M rate.
  • Option of choosing fixed payments on the loan.
  • Possibility of quarterly interest-only periods for a total of up to 10 years over the entire term of the loan – subject to addition of a margin.
  • Loan term of 1 to 30 years.
  • The loan-to-value ratio can be up to 80% (75% for holiday homes).
  • The loan is repayable at any time at par – with no extra fee charged.
  • Possibility of extraordinary repayment on the loan – with no fee charged.

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Facts about pricing 

The total variable interest rate payable on a Danske Bolig Fri loan, including an individual, variable margin, is between 0.1975 and 0.6975 per annum.

If borrowers want to lock in the interest rate for 1 to 10 years, a margin of 0.04 to 0.93% per annum is payable, depending on the length of the period. The stated margin payable for locking in the interest rates is at 7 May 2019 and varies from day to day.