Money costs nothing with negative-rate mortgages
They can repay a lower amount than the one the bank has provided in the form of a mortgage.
Denmark, which makes history to itself, within the European Union but with a central bank of its own, has inaugurated the season of negative rates, at least 0.5%. In practice, the Danes – to whom the money costs less than nothing – can repay a lower amount than the one the bank has disbursed in the form of a mortgage.
“We are potentially witnesses of the biggest wave of conversions – says Jeppe Juul Borre, of the bank Arbejdernes Landsbank – the interest rate was further lowered in 2019 due to market unrest, trade wars and fears about the trend of ‘economy”.
In short, banks prefer to suffer a budgeted loss rather than take the risk of applying higher rates and seeing more bad loans. In Denmark more than 100,000 people took advantage of the mortgage opportunity at negative rates: in total, in the previous quarter, 187 billion Danish mortgage loans were reorganized.
A ten-year mortgage of € 1 million at a fixed rate of -0.5% involves the repayment of € 995 thousand. Experts fear the bubble risk: the easy access to credit has in fact produced the rising costs of houses in Denmark and observers are afraid that a dangerous real estate bubble will be created.