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MORTGAGE

Analysts doubt Sweden will push through SBAB sale

Upheaval in the financial markets will likely complicated plans by the Swedish government to sell off state-owned mortgage lender SBAB in the near future, analysts said on Friday.

After winning power in 2006, Sweden’s centre right government embarked on the country’s biggest-ever privatization programme, aiming to raise about 200 billion Swedish kronor ($30.2 billion) in its four-year mandate period.

It has already sold Absolut Vodka maker Vin & Sprit, real estate firm Vasakronan, holdings in bourse operator OMX and a stake in telecom operator TeliaSonera.

However, the latest wave of market turmoil has made a sale of SBAB and the state’s 20 percent stake in Nordea much less likely.

“It is the wrong time to sell,” said one senior investment banker.

“I don’t think they will be able to sell SBAB at a price that would be acceptable for Swedish voters.”

Half-way through its mandate period, the four-party alliance is trailing in the polls.

Financial Markets Minister Mats Odell, who is running the privatization programme, said last week several parties were still interested in SBAB.

“My interpretation of what Mats Odell has said is that they don’t need to sell for cash, but could do some kind of structural deal,” said Mats Anderson, an independent bank analyst.

“If Mats Odell succeeds with that at a sensible price level, one can only congratulate him.”

However, Anderson said financial market conditions may improve before the slated 2010 date for the election.

MORTGAGE

Can you really get paid for borrowing money in Denmark?

Last week, the Realkredit Denmark financial institution paid, for the first time, negative interest to a customer—meaning the customer was effectively paid for taking out a mortgage.

Can you really get paid for borrowing money in Denmark?
File photo: Kasper Palsnov / Ritzau Scanpix

Negative interest results in the customer effectively being paid by the lender to borrow money, or that they pay back less than they have loaned.

On Monday, the phenomenon was showing signs of spreading elsewhere in the country’s financial sector.

Homeowners who have taken out a certain type of loan known as an F5 loan, with which up to 40 percent of the house’s value can be borrowed, can, with Monday’s interest levels, find themselves paying minus 6 kroner per month to borrow 1 million kroner.

Interest on F5 loans is currently at -0.56 percent, with the repayment rate 0.55 percent. Those terms mean homeowners can be given money for borrowing money.

While last week’s negative interest mortgages were the result of a specific set of contributory circumstances, a larger group of borrowers could benefit this time, according to Christian Helligsøe Heinig, Realkredit Denmark’s head economist.

READ ALSO: Lender to launch Denmark's cheapest ever mortgage

“It will typically be homeowners in the senior age group, who think they have repaid enough and want to make their daily lives sweeter, who will be looking towards flexible repayment and F5 loans,” Heinig said.

Around 1 in 4 of homeowners borrowing from Realkredit Denmark have a loan-to-value ration of a maximum of 40 percent, he said.

But the situation is an “absurdity” that breaks with economic wisdom, he added.

It is partly caused by a flooding on the market of money available for investment, he said.

That is related to attempts made by central banks to stimulate the economy by increasing the amount that can be borrowed for investment in projects that can benefit society in an economic sense.

Another reason is the growing size of private savings, he said.

“In all cases, it is important to be clear that the opportunity to make money by borrowing money should not tempt ordinary members of the public to throw themselves into investments using borrowed money,” the economist said.

“There’s no such thing as a ‘free lunch’ in the current financial climate,” he said.

READ ALSO: What you need to know when buying a home as a foreigner in Denmark

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