What’s the Cost of Loans in Different Parts of Europe?

Jul 27

When the European Union was founded in 1993, the continent took a massive step forwards toward unifying its political and financial systems. Today, there are only a few key differences in the economies of the European Union member states – and the common currency has tied Europe together like nothing else could. Even so, differences in the local economies of EU members leads to varying loan rates in each nation.

Which European nation has the most favorable terms for borrowers? What about countries outside of the European Union? Can Norway compare favorably to the EU countries of England, France, Germany, and Denmark?


England is one of the only countries in the European Union that didn’t buy into the common currency due to fears that the strong English currency (the Pound) would be devalued by the entrance into the European common economy. This has been a highly successful strategy by the English government, and England currently has one of the most stable lending rates. In 2013, the average interest rate on a mortgage in England fell to around 3.5 percent – a new low, and made possible only by the English financial stability and the lack of exposure to currency problems caused by the European bailouts.


Interest rates in France are at a historic low – partly because of the global financial crisis and partly because the French economy is having some trouble distinguishing itself as a competitive force in the face of growing competition from Eastern Europe and other countries with less extreme worker protection laws and trade regulations. The mortgage interest rate in France is around 2.25%, and other loans are relatively cheap… if you can qualify for them. French banks are tightening up on restrictions that limit the flexibility of the credit pool.


Germany is considered the stalwart “fiscal conservative” state in the European Union, and its strong economy is relied upon to prop up some of its neighbors. According to the Economist, the lending rate in Germany increased from 2.95% in April 2004 to 3.06% this month, with high hopes for continued growth back to the levels of the pre-crisis economy.


Denmark is comparable to most other countries in Northern Europe, with a 3.5% interest rate on most loans. Unfortunately, Denmark has extremely expensive real estate, and it has become popular for Denmark property buyers to sign up for an “interest only” payment plan where they pay 2% of the value of their property every year but never build up any equity in their property.


The interest rate in Norway surged throughout the 1990s, and Norway was one of the most expensive countries to get a loan in with 11.00 interest in 1992. However, the current interest rate is shockingly low, at 1.50 percent, thanks to government attempts to spur the economy in the wake of the 2008 global financial meltdown. While loans are cheap across the board, a Norwegian loan comparison service is usually necessary to find the best possible deals with the minimum of government-mandated fees.