Jyske Bank, the third largest bank in Denmark, announced last week that its clients can now take out a 10-year mortgage with a fixed interest rate of –0.5%, meaning that clients will repay the bank less than they borrowed.
In other words, if you purchased a home for $1 million on credit and paid off the mortgage in 10 years, you would only return $995,000 to the bank.
Fairness requires mentioning that even with a negative interest rate, banks often charge fees associated with the borrowing process. This means that clients will ultimately have to pay back more than what was borrowed.
"This is yet another chapter in mortgage history. A few months ago we would have said this was impossible, but we never cease to be amazed, and it opens up new opportunities for homeowners," said Mikkel Høegh, a housing loan economist at Jyske Bank, in an interview with a Danish TV channel.
Jyske Bank's negative rate has become one of the latest in a series of extremely low interest offers by banks to homeowners in Denmark.
According to The Local, Scandinavia's largest lender Nordea Bank has stated that it will offer a 20-year fixed-rate mortgage at 0%. Bloomberg reports that some Danish lenders are offering a 30-year mortgage at 0.5%.
It may seem illogical for banks to issue loans at such low rates, but there is an explanation for this.
Financial markets are currently in an unstable and uncertain position. Risk factors include the ongoing trade war between the U.S. and China, Brexit, and a general slowdown in economic growth worldwide, especially in Europe.
Many investors are fearing a financial collapse in the near future. Therefore, some banks are willing to lend money at negative rates, accepting smaller losses rather than risking larger losses by lending at higher rates that clients may not be able to repay.
Source: 3dnews.ru
