131–140 of 152 posts
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Nobody in Europe does. But I wonder if credit cards will follow suit and offer negative rates. Somehow I doubt it, though.
Nobody in Europe does. Bullshit. It's not as popular as in the US, but it's not like credit cards are unheard of here.
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I can't find all the fine details on this loan, but there are definitely loans that stop you from prepayment, or at least have a penalty associated with them. These penalties can be pretty large and definitely are a reason not to pay back the entire mortgage before 10 years. In this exceptional case I'm assuming there is a prepayment penalty for a large portion of that 10 year fixed rate period.
Those prepayment fines are basically what the bank is losing out on you. If you have a 3% mortgage and the current rate is 2%, then the bank would lose out 1% for the current mortgage period. That's the penalty.
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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.
I can't find all the fine details on this loan, but there are definitely loans that stop you from prepayment, or at least have a penalty associated with them. These penalties can be pretty large and definitely are a reason not to pay back the entire mortgage before 10 years. In this exceptional case I'm assuming there is a prepayment penalty for a large portion of that 10 year fixed rate period.
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Generally a fixed term has a worse rate for the borrower than the floating rate (assuming the floating rate isn't expected to change hugely in the future). As a rule of thumb if you refinance from a fixed rate to a better rate you have to pay penalty fees if the rate is worse for the lender (better for you) relative to how much the lender would have made off you if the loan had continued at the previous rate. Because…
In Denmark, if you have a fixed-rate mortgage, you are always allowed to buy back the bonds at their nominal value. For that reason, you absolutely can save money by refinancing when the the interest rates go down (you still have to pay some fixed fees in order to do so). The funny thing is, that you can sometimes also save money when the interest rate goes up, because in that case you can buy back the underlying bon…
That’s very surprising. Do you have a reference in English?
Edit: nevermind, I’ve found that’s indeed the case and those are callable bonds (so the prepayment risk is included in the price).
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It's pretty ridiculous if the penalty isn't specified by the contract... Whatever new rate you might get is not the business of your previous loan holder.
They are specified in the contract. If you sign the mortgage contract you are giving the bank steady business for the next 10 years in return of a lower rate. By breaking that 10 year agreement the bank loses money which they will charge you for.
Not the world's first at all. https://tradingeconomics.com/switzerland/interest-rate Switzerland has been negative for years. Negative interest rates mean only 1 thing. The central bank is 100% confident that they are on the brink of deflationary spiral; much like Greece or Japan. This is all connected: https://news.ycombinator.com/item?id=20615403 https://news.ycombinator.com/item?id=20654624 https://tradingeconomic…
been told I should worry about it for years now, but Australia's economy hasn't broken yet (it's weak, but that just means it's doing better than comparable nations but less than what it could be if we weren't being mismanaged by the most incompetent government this side of the black stump). how can I rely on a forecast that is eternally bad? I guess the economy will turn sour eventually, but I can't rely on a predic…
There was people mid financial crisis who were still denying the recession. There are tons of people who are saying we are going to have a recession during market highs.
>but Australia's economy hasn't broken yet (it's weak, but that just means it's doing better than comparable nations but less than what it could be if we weren't being mismanaged by the most incompetent government this side of the black stump).
I'm not Aussie; love Australia though. Politics aside, that's the thing people don't understand right before a debt cycle. Housing prices go sky high, car manufacturing dies, debt becomes tremendously cheap, manufacturing isms crash or contract, prime rates usually just went up, unemployment at historical lows.
Literally all these indicators are pretty strong indicators and ALL of them are happening.
>how can I rely on a forecast that is eternally bad? I guess the economy will turn sour eventually, but I can't rely on a prediction that's always bad news since I'll miss all the good.
That's more a perspective. If you watch CNBC, they literally didn't believe the financial crisis was happened and it has been a bull market since forever. Zerohedge on the otherhand will have an article a day explaining how society's downfall is upon us.
The important thing to understand is that literally nobody has a clue what's going to happen.
We may never have another recession; ETFs and passive nature of investing could lead to markets just being completely stable from now on. Bitcoin could be the one picking up all the volatility, leaving the stock markets stable.
Personally I think the debt cycle is immutable.
One person's spending is another person's paycheque. When the automotive sector has basically started laying off people because people aren't buying cars; and it's happening to all Euros, Japanese, and North America car manufacturing companies are all laying people off. That's the beginning of the cycle downturn.
Not really. “As a result, oddities now abound. Danish lender Jyske Bank last week issued a 10-year mortgage bond at an interest rate of minus 0.5 per cent, meaning homeowners are being paid to borrow.” In fact the providers of the capital will pay the bank for those mortgage-backed bonds (they get a negative yield). The bank will get some spread from the client, who will also pay. https://www.google.ch/amp/s/amp.ft.c…
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 :)
Earlier quoted context omitted.
Those prepayment fines are basically what the bank is losing out on you. If you have a 3% mortgage and the current rate is 2%, then the bank would lose out 1% for the current mortgage period. That's the penalty.
That is not how the penalties are worded at all. Penalties are usually in the form of a percentage of a number of months' interest. I understand the fine is because the bank makes money on loans by being able to rely on them being a fixed long term, and the cancellation affects that, but it's not just the bank passing on that percentage loss directly.
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It's pretty ridiculous if the penalty isn't specified by the contract... Whatever new rate you might get is not the business of your previous loan holder.
They are specified in the contract. If you sign the mortgage contract you are giving the bank steady business for the next 10 years in return of a lower rate. By breaking that 10 year agreement the bank loses money which they will charge you for.
Earlier quoted context omitted.
Nobody in Europe does. But I wonder if credit cards will follow suit and offer negative rates. Somehow I doubt it, though.
Nobody in Europe does. Bullshit. It's not as popular as in the US, but it's not like credit cards are unheard of here.