Need a cheap mortgage rate? Try this Danish bank – it’s less than 0%

ADVERTISEMENT

Danish people hoping to get on the housing ladder were given a boost earlier this month when one of the country’s banks announced it will now offer negative interest rates on mortgages.

Jyske Bank, Denmark’s third-largest bank, is to provide 10-year mortgages with a -0.5% interest rate.

Just like it says on its website: “Yes, you read that right.”

But in practice, that doesn’t mean borrowers get paid to take out a loan. Just like any other loans, they will make monthly repayments but the remaining balance will go down by more than they have paid.

Furthermore, with costs and fees, borrowers will still end up paying more than they have actually borrowed. The bank estimates that someone borrowing 250,000 Danish Kroner (€25,000) will repay 269,127 DKK over 10 years.

The other downside is that with a 10-year duration, it’s unlikely people will be able to fully finance a house with it. Instead, it is designed as a top-up loan.

Another Danish Bank Nordea has announced that it will now offer a 0% interest rate 20-year mortgage and is reportedly mulling a negative interest rate 30-year mortgage. In Germany, consumers can already take personal loans with negative interest rates.

Although they sound like a sweet deal, negative interest rates are not necessarily a good thing. They are the results of the European Central Bank (ECB) cutting its own depository interest rate — what banks pay to store their cash at the institution — into negative territory back in 2014.

The aim was to force banks to lend more money to businesses and consumers and kickstart the economy on the Old Continent, then still feeling the effect of the global financial crisis and the ensuing euro crisis.

But five years later, the ECB’s interest rates are still negative and yields on some EU governments bonds — the return investors get for buying up a country’s national debt — have also turned negative as they are deemed safe bets.

Some experts have warned that the low-rate environment has hit banks’ profitability and may force them to take more risks on financial markets or to restrict their lending activity.