Good news for Danish home buyers! The Jyske Bank now offers a 10-year fixed rate mortgage at -0.50% over the life of the loan. If you borrow $300,000 to buy a home, you will only pay back $298,500.
If that seems like an offering from Superman’s reverse Bizzaro world, consider that government banks across Europe have been selling bonds at negative interest rates for years, and currently more than $14 trillion worth of bonds across the globe trade at negative interest rates. Essentially, investors pay bond issuers for the privilege of taking their money. It’s like depositors paying banks interest for holding their funds.
It was only natural that this would eventually flow into the mortgage market because housing loans are typically bundled and sold to investors. As government bond yields fall further into negative territory, mortgage bond interest rates, and therefore mortgage interest, was sure to follow.
According to Copenhagen Post, Jyske Bank housing economist Mikkel Høegh told Danish TV:
“It’s another chapter in the history of the mortgage. A few months ago, we would have said that this would not be possible, but we have been surprised time and time again, and this opens up a new opportunity for homeowners.”
Due to the fees associated with originating a loan, borrowers might still repay more than they borrowed, but it won’t be by much.
This is just another symptom of the crazy financial world that central bankers have created with excessive monetary easing programs. No one knows where these strange machinations will end, and no one knows what it will look like when it all unwinds.