The bank that offering the world’s first negative mortgage rate

The bank that offering the world’s first negative mortgage rate

The bank that offering the world’s first negative mortgage rate

While it appears that the Bank of Canada is in no hurry to cut interest rates from the current 1.75%, many other countries’ central banks already have rates that are at historical lows.

That means that if they want to offer really low mortgage rates there is little room for manoeuvre, unless they take a radical step like negative interest rates!

That’s the step that Danish Bank Jyske Bank has made; it is offering homeowners a 10-year mortgage at a rate of minus 0.5%.

But the lender is not losing money from the deal as they can borrow from institutional lenders at negative rates, potentially lower than the -0.5% offered to borrowers, therefore still making a profit.

The deal does not mean that customers get cash in their bank accounts – or that they stop making mortgage payments each month, but they will pay back less than they borrow.

The negative interest rate reduces the amount they owe by more than their monthly payment, with the monthly payment also reducing over the 10-year period.

However, Danish customers are not accustomed to shorter amortization periods with 30-year mortgages more normal and that the fees associated with the 10-year deal are likely to be higher than they would otherwise pay.