Denmark offers homeowners 20-year loans at a fixed interest rate of zero
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Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero
#2House prices are driven upwards due to low interest rates, so this move will most likely only exacerbate the already high house prices.
I'm not sure about Denmark, but in Germany house prices have about doubled in the last 10 years, (with the ECB insisting there's no inflation).
Given the choice between high interest rates and cheaper house prices, versus low interest rates and expensive houses, I'd rather take the former, since rates can always come down again, allowing you to refinance and pay less for your house overall.
When (in the current environment) rates start going up again (they're basically at the lower bound now), house prices will fall, however home "owners" (with mortgages) won't pay less for their houses because their mortgages are fixed (and if they weren't fixed, they'd be doubly screwed by the high rates).
Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero
#3So, the stock market gives amazing returns, but debt is free? We must have absolutely massive asset price inflation, even if we have no consumer price inflation. I wonder if central banks are looking at the right metrics.
Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero
#4Can you say 'housing inflation'?
All this does is introduce more monetary demand for housing, increases prices, and stretches out credit putting further distance between those with no homes, and those with the biggest.
Housing may be one of the largest drivers in personal wealth in our era - the more you can afford for a down payment and payments, the greater your financial leverage over those with less leverage.
And of course, renters are left in the lurch with higher prices.
A smarter plan might be to limit the term lengths of mortgages to 15 years, and to frankly increase (and stabilize) interest rates on homes. If interventions are what you want to do ...
FYI money will come out of regular consumption and get plowed into real-estate, which is mostly a non productive asset.
Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero
#5This is not truly a 0% loan.
Because of the fees, you will pay a minimum of 0,74%.
Also because these mortgage instruments are traded at a price less than 100, you have to take out a loan larger than the amount of money that will be payed out. For example, to loan $100 you might have to take out a loan where you start out owing $105, which further increases the actual interest.
Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero
#6This is nuts. Housing inflation is rampant, I live in Sweden and my house value increased 40% in 5 years. We currently pay less per month for our 250 m2 house than my parents pay for their 75 m2 rental apartment.
Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero
#7Earlier discussion from yesterday: https://news.ycombinator.com/item?id=25647652
Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero
#8This is nuts. Housing inflation is rampant, I live in Sweden and my house value increased 40% in 5 years. We currently pay less per month for our 250 m2 house than my parents pay for their 75 m2 rental apartment.
Jesus, can yong folk afford to buy anything at this point?
Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero
#9House prices are driven upwards due to low interest rates, so this move will most likely only exacerbate the already high house prices. I'm not sure about Denmark, but in Germany house prices have about doubled in the last 10 years, (with the ECB insisting there's no inflation). Given the choice between high interest rates and cheaper house prices, versus low interest rates and expensive houses, I'd rather take the f…
Little trick for a piece of mind:
Recalculate prices and salary into gold. You will discover that things are more or less the same and stable. Shoemaker in 15th century made similar money as today.
Re: Denmark offers homeowners 20-year loans at a fixed interest rate of zero
#10House prices are driven upwards due to low interest rates, so this move will most likely only exacerbate the already high house prices. I'm not sure about Denmark, but in Germany house prices have about doubled in the last 10 years, (with the ECB insisting there's no inflation). Given the choice between high interest rates and cheaper house prices, versus low interest rates and expensive houses, I'd rather take the f…
Same thing in the Netherlands. Prices doubling. The monthly costs are similar to years ago, but the high barrier to entry makes it impossible for young people to get anything similar to previous generations for the same money. As a result, rent goes up and young people now pay much more rent than before, semi-forced.
Low rates do not help when the market is this overheated. Worse, disincentivising people from prematurely paying their mortgage sounds like a great idea for recreating a certain crisis not too long ago.