A Danish bank has launched the world’s first negative interest rate mortgage – handing out loans to homeowners where the charge is minus 0.5% a year.
Negative interest rates effectively mean that a bank pays a borrower to take money off their hands, so they pay back less than they have been loaned.
In fact, they’re now negative. Denmark’s Jyske Bank JYSKY, -20.24%, is now offering a 10-year fixed-rate mortgage at negative 0.5%. Additionally, Finland-based Nordea Bank announced Wednesday that it will offer a 20-year fixed-rate mortgage in Denmark that charges no interest, and the bank is preparing for the possibility of home loans up to 30 years in duration having negative rates. Currently, the rates on 30-year fixed mortgages averaged just 0.5% in Denmark.
When a mortgage rate is negative, a borrower still must make monthly payments toward their principal, but they ultimately pay back less than they originally borrowed. They would, of course, still have to pay other costs and fees.
In the U.S., the situation is much different. Right now, the 30-year fixed-rate mortgage in the U.S.
At the same time, other long-term rates now stand at or below 0% across the world. Thirty-year German bond yields TMBMKDE-10Y, -7.60% have dropped deep into negative territory, and central banks in Europe and Japan have toyed with 0% or negative rates for years now.