Jyske Bank, Denmark's third largest bank, said last week that its customers will now be able to take out a 10-year mortgage with a fixed interest rate of -0,5%, meaning customers will repay less than they borrowed.
In other words, if you bought a $1 million home on credit and paid off the mortgage in full in 10 years, you would only pay back $995 to the bank.
In fairness, it should be noted that even with a negative interest rate, banks often charge fees associated with the lending procedure. This means that customers will end up having to pay back more than what was borrowed.
βThis is another chapter in the history of mortgages. A few months ago we would have said it was impossible, but we are constantly amazed and it opens up new opportunities for homeowners,β said Mikkel HΓΈegh, home loan economist at Jyske Bank, in an interview with Danish television.
Jyske Bank's negative rate is one of the latest in a series of extremely low interest rates offered by banks to Danish homeowners.
Nordea Bank, Scandinavia's largest lender, has said it will offer a 20-year fixed-rate mortgage of 0%, according to The Local. Bloomberg reports that some Danish lenders are offering 30-year mortgages at 0,5%.
It may seem counterintuitive for banks to lend at such low rates, but there is a reason for that.
Financial markets are now in an unstable, uncertain position. Risk factors include the ongoing trade war between the US and China, Brexit and a general slowdown in economic growth worldwide, and especially in Europe.
Many investors fear a financial crash in the near future. Therefore, some banks are willing to lend money at negative rates, taking on smaller losses rather than risking larger losses to lend at higher rates that customers cannot repay.
Source: 3dnews.ru