You can bank on it

In the days between Christmas and New Year we took the opportunity to help our elderly mother/mother in law with some banking issues that she had. Being the sensible soul that she is, she keeps her money in the bank. As you would expect. Thing is though, that she actually keeps her money in the bank. Not in a bank account, but in a box. Seems she trusts the bank enough to look after her money, just so long as she can go and see it any time that she wants. I guess if we all thought the same way as each other then the world would be a pretty dull place.

So anyway, a few days before Christmas she received a letter from her bank saying that it was no longer allowed to keep cash in a safety deposit box. They were worried about security if people thought that there was money in the bank. Hello ? Think about what you've just said for a moment. You're a bank, for Christ sake. That's what you do. Oh well. Naturally old Mum was a bit worried about this turn of events. At our advice, she did a bit of ringing around and found out that our own bank was more than happy to hold her money in their safety deposit box vault, and at one third of the annual fee she was paying to her current bank. Problem solved.

We rolled on into the bank, the 3 of us. Being the person in the family who was taller than 1,5m I was brought along as the drug mule to carry the loot across the street from one bank to the other. Not that it was really an issue. I've discovered that the vision of 2m tall 120kg body building Vikings in Sweden is pretty much an urban legend. No doubt dreamed up by tourist operators outside of Sweden. I'm a reasonably tall person, and I've found that I'm taller than about the same number of people in Sweden as I was in NZ. So at least the 2m tall part is a myth. The 120kg might still be accurate.

I scored a free lunch for my efforts and the day was ticked off as a success. The difference between the 2 Swedish banks in this exercise got me to thinking about my experiences with banking systems. there are a lot of people who criticise Swedish banks. My advice to them is to go elsewhere first and then complain. There's a lot of positives with Swedish banks. Firstly, they seem to operate independantly of each other. What I mean by that is that there doesn't appear to be the "unofficial" price fixing agreements between banks that was so obvious in New Zealand. In NZ it really didn't matter where you banked, you got pretty much the same deal at every bank. Same fees and charges, same interest rates, same everything. In Sweden it really is worth shopping around when buying banking services or comparing interest rates. That's been a new experience for me. I've also found that Swedish banks appear to be less profit driven than NZ banks. They aren't giving their services away for free, but they do seem to set their charges to what is fair and reasonable. Rather than taking as much money as they can for their offshore owners and investors. Swedish banks seem to care about what is happening in Sweden. I like that.

When we bought our property in Sweden, we took out a mortgage with a Swedish bank. A pretty painless and straight forward process, as it had been in NZ. Cost wise, there were significant differences between the systems. We had sold our home in NZ about 6 months earlier, and paid off our mortgage. At that time we had a pretty good interest deal of around 8%. Best it had been in years (my first every mortgage had been borrowed at 24% interest). Comparing the 2 countries, I found that property prices were about the same when you converted the currencies. The average wage, however, was higher in Sweden than it was in NZ. Which made property in Sweden more affordable than in NZ. Make sense ?

My mortgage interest rate in NZ was 8%. Our rate in Sweden ? 2,4%.

Now, I'm pretty sure that Swedish banks aren't losing money. They're not a charity. Which means there was about a 5,5% "greed factor" wrapped up inside every NZ mortgage. For those of you who think that a free market is a great idea, that's what you get.

So the fees are fair. And so are the conditions, in my opinion. In NZ, one took out a mortgage for a set term. Say 20 years. The first thing the bank did was to work out how much interest you would be paying them over that entire 20 year period. And then asked you to pay that first. Which meant that, first the first 10 years of repayments, you basically only paid interest. Obviously you could choose fixed term interest rates, or variable interest rates, but you still owed the bank all the interest from day one.

Fast forward to our Swedish mortgage, six months later. As with the NZ mortgage, there is a maximum repayment period. To be honest, I don't remember the length of ours, but let's call it 20 years also. However, the mortgage also includes a "renewal" date, which you decide on at the time. We chose a 2 year period. The bank works out how much interest they are owed. Over the the coming 2 year period, not over the entire 20 year life of the loan. And that's how much interest you have to pay them each month for the next 24 months. Plus however much of the principal that you agree on at the time. There's a massive difference and savings right from the start.

You are pretty much locked into the conditions of that 2 year period (or however long you agree the part period to be). You have to pay the interest payments (obviously) and you can't really vary the principal repayments very much. Keep in mind that we only paid the interest that the bank would have received during that 2 years. This is where I start to get excited. If we had broken our NZ mortgage early (ie paid it off), we would have been forced to repay all the future interest "lost" by the bank. The exception was if you had sold your house. If we decided, after 20 months, to repay our Swedish mortgage in full, the most interest penalty we would have would be for the bank's "lost" interest only for the last 4 months of our agreed 24 month period. At 2,4%. Pocket change.

The good news doesn't end there. After 24 months, we reached our mortgage anniversary date. It is essentially a 24 month loan with an automatic renewal. You don't have to apply for a new loan every time.  On that day, for one day, the clock stops. On that day, you can do anything you want. You can change the 2 year period to be a 1 years period, or a 5 year period. You can change the interest system to a fixed rate, or to a variable rate, you can make a lump sum payment without any limit or restriction. Or you can choose, as we did,  to repay the entire loan in full. Only on that day. With zero fees, zero penalties, and zero charges for lost interest. Talk about respecting your customers.

I guess no bank is completely trustworthy. we treat them all with a certain degree of suspicion. But, having experienced two different systems in 2 different countries I think that Sweden has a banking system designed to work with people, for people. I'm not sure that they really appreciate quite what they have. Good job that I do.