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.
Jyske Bank, Denmark’s third largest, has begun offering borrowers a 10-year deal at -0.5%, while another Danish bank, Nordea, says it will begin offering 20-year fixed-rate deals at 0% and a 30-year mortgage at 0.5%.
In Denmark, interest rates on savings deposited in Jyske have already fallen to zero. Now banks in Denmark are thinking of following Switzerland and moving to negative rates on deposits.
"Right now, for deposits we don’t have a negative interest rate. But discussions are ongoing at the very highest level. It’s just that no bank here wants to be the first mover into negative deposit rates,” said H?egh.
In reality, the Jyske mortgage borrower in Denmark is likely to end up paying back a little more than they borrowed, as there are still fees and charges to pay to compensate the bank for arranging the deal, even when the nominal rate is negative.