Woo!! Give me one of those negative interest mortgages here in the US for my house - I’ll gladly pay some points for it.
What a world we live in.
Danish bank launches negative interest rate mortgage
101–110 of 152 posts
Re: Danish bank launches negative interest rate mortgage
#102Earlier quoted context omitted.
And yes, the negative interest rate at the Danish central bank does translate to negative interest rates for deposits. Not yet for consumers, but corporate accounts have negative rates.
Negative central bank rates are an attempt to spur consumption via all of the stimulus created since the financial crisis. Banks have been loath to pass on these negative rates to depositors because no one wants to be the first bank to do so, as depositors would flee that bank for another bank that was still eating the negative interest rate. However, the banks legally cannot coordinate actions as that would be evide…
US banks have proven (to themselves at least) that they can get away with sub-1% savings rates for long term, regardless of what the Fed rate is.
The first one to do it will be a pariah (briefly) but the next 5 will be "just following the trend" - the question is who will be first?
Re: Danish bank launches negative interest rate mortgage
#103Earlier quoted context omitted.
Some background: In Denmark, mortgages for housing are handled by special real-estate lenders (realkreditinstitutter) who issue bonds and handles defaults. These bonds are considered to be very stable, about the same quality as state bonds, as the lenders will only lend up to 80% of the value of the house (an ordinary bank loan must be used for the remaining fraction) so can usually recover most of the money through…
>These bonds are considered to be very stable, about the same quality as state bonds >can usually recover most of the money through a forced sale This exact line of thinking is what led to the US real estate crash in 2008/2009
That’s true, except that you can only get a loan in Denmark if you have 20% of the purchase price to put down as collateral. That means sub prime mortgage lending doesn’t exist in Denmark and that combined with liar/NINJA loans was a substantial contribution to the US housing crash, together with securitisation. If it had been impossible to securitise mortgages with less than 20% down in collateral the housing crash would have been a non event in the financial markets.
Re: Danish bank launches negative interest rate mortgage
#104It seems like a (cynical?) way to turn today's overpriced real estate assets into a stream of payments. Someone purchasing a home for DKK 300K with no interest may think they're getting a deal, until they try to resell that home and find out they cannot sell it for more than DKK 240K.
That would imply we're getting into a weird deflationary regime where money shrinks under negative interest rates, yet still buys more in the future!
That sounds an awful lot like Japan.
https://investors-corner.bnpparibas-am.com/markets-strategy/...
Re: Danish bank launches negative interest rate mortgage
#105Buying a house means taking over a payment and tax liability, it's not just about owning and controlling an asset. Confidence in the financial system is apparently so low that someone is willing to pay you fictitious money now in return of fewer actual cash in the future.
What am I missing here? why are they doing this? There has to be some other gain somewhere else.
Re: Danish bank launches negative interest rate mortgage
#106Earlier quoted context omitted.
Some background: In Denmark, mortgages for housing are handled by special real-estate lenders (realkreditinstitutter) who issue bonds and handles defaults. These bonds are considered to be very stable, about the same quality as state bonds, as the lenders will only lend up to 80% of the value of the house (an ordinary bank loan must be used for the remaining fraction) so can usually recover most of the money through…
That sounds similar to how Mortgages used to work in the UK in the 60s. One would get a mortgage from a Building Society for around 75% of the property value, and had to get a Bank Loan for the remainder which they couldn't cover from savings.
What has changed? How do mortgages work today in the UK?
Re: Danish bank launches negative interest rate mortgage
#107Earlier quoted context omitted.
It's a gross simplification, but with the volume that is Danish housing vs demand for said housing the risk is very low. One of many issues leading into the 2008 crash was how Us mortgages were bundled, rated AAA, then resold as an investment tool. However, the ratings were falsely boosted to promote investment and when the underlying junk mortgages fell through and demand fell off a cliff with the rest of the econom…
> In this case, Danish mortgages are not bundled, rated falsely positive, and not sold as an investment tool like in 2008. Danish loans are definitely securitized and sold as investment tools. They are a classic interest rate risk hedge. It’s been a while since I was adjacent to them but the bigger difference in Danish mortgage backed securities were a) no governmental guarantee on them b) less protections for the bo…
low leverage in proportion to the total asset value
But what’s that total asset value if interest rates are 10% (vs -1%)?
Re: Danish bank launches negative interest rate mortgage
#108Why doesn’t the danish govt just print more money? Although part of the eu, they opt out of the monetary policy and still use the kroner. OTOH, how much of the eu debt does Denmark own— and vice versa. If they affect the kroner-euro exchange rate then they could lose money if it moves the wrong way.
Re: Danish bank launches negative interest rate mortgage
#109what does that mean for poor people, does someone know? Can someone explain?
Poor people are screwed up regardless -- if rates are high, they can't afford payments, if rates are low, prices rise and they still can't afford payments. Not to mention getting downpayment. Workaround: don't be poor.
I don't know how to be not poor :| applying for jobs but takes time to get one
Re: Danish bank launches negative interest rate mortgage
#110Earlier quoted context omitted.
Don't forget the mortage runs for 30 years and after 10 years, you are forced to pay the rate at that moment... so in the end, it will be ok :)
There no rule that the mortgage will run for 30 years. It’s just what most people choose. But there’s nothing stopping anyone from paying back the entire mortgage in 10 years.
> But there’s nothing stopping anyone from paying back the entire mortgage in 10 years.
Apart from not having the money.