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Danish bank launches negative interest rate mortgage

theguardian.com

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Re: Danish bank launches negative interest rate mortgage

#4

Post by apo »

This is all the more surprising given that inflation in Denmark is running ~1%/year.

That means the bank is absorbing a real loss of 1.5%/year on the deal.

Meanwhile, the housing market is roaring:

https://tradingeconomics.com/denmark/housing-index

It would be one thing to see negative rates in a declining property market and/or in a deflationary environment.

However, negative rate mortgages are happening in what looks like a normal economy with low inflation and red-hot housing market.

Somebody is very wrong about one or more of the following:

- the future direction of the housing market

- the future direction of interest rates

- the future direction of inflation

Edit:

Google translate sheds some light. It appears that the Danish equivalent of "points' clouds the picture:

> Total repayments before tax DKK 277,392 (on a DKK 250,000 loan) - of which total interest and contributions DKK 8,264 changes in the exchange rate will affect the size of the amount paid out.

https://translate.google.com/translate?hl=en&sl=auto&tl=en&u...

Low, but not negative.

Re: Danish bank launches negative interest rate mortgage

#5

Post by joeyrideout »

enra wrote: post #3
aszantu wrote: post #2

what does that mean for poor people, does someone know? Can someone explain?

Poor people don't always have the means to save to afford the 10-30% down payment, so they cannot benefit from the cheap mortgage rates.

On the other hand, the banks are basically transferring wealth to the middle class (or anyone who can afford a mortgage) by paying them to borrow money.

Re: Danish bank launches negative interest rate mortgage

#6

Post by kebman »

apo wrote: post #4

This is all the more surprising given that inflation in Denmark is running ~1%/year. That means the bank is absorbing a real loss of 1.5%/year on the deal. Meanwhile, the housing market is roaring: https://tradingeconomics.com/denmark/housing-index It would be one thing to see negative rates in a declining property market and/or in a deflationary environment. However, negative rate mortgages are happening in what loo…

As far as I know, fees and charges on the loan make it about 2% anyway. Still a pretty cheap loan, I'd say.

Re: Danish bank launches negative interest rate mortgage

#8

Post by 0x0 »

The effective interest seems to be above 0% though. The linked FAQ shows calculations where the total amount paid back is more than the total loan amount. Plus some talk about some kind of exchange rate(?) seems like this could be even riskier than normal?

Re: Danish bank launches negative interest rate mortgage

#9

Post by collyw »

apo wrote: post #4

This is all the more surprising given that inflation in Denmark is running ~1%/year. That means the bank is absorbing a real loss of 1.5%/year on the deal. Meanwhile, the housing market is roaring: https://tradingeconomics.com/denmark/housing-index It would be one thing to see negative rates in a declining property market and/or in a deflationary environment. However, negative rate mortgages are happening in what loo…

>That means the bank is absorbing a real loss of 1.5%/year on the deal.

(As I understand it) the Eurobor rate is negative (the rate that the central bank lends to the other banks), so its unlikely that the bank are taking the hit directly.

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