How screwed up is the world when savers have to pay banks to keep their deposits and those same banks turn around and pay debtors on their mortgages? This will end badly.
Submitted by Tyler Durden on 01/30/2015 15:44 -0500
With NIRP raging in the Eurozone and over €1.5 trillion in European government bonds trading with negative yields, many were wondering when any of this perverted bond generosity will spill over to other debtors, not just Europe’s insolvent governments (who can only print negative interest debt because of the ECB’s backstop that it will buy any piece of garbage for sale in the doomed monetary union). In fact just earlier today we, rhetorically, asked a logical – in as much as nothing is logical in the new normal – question:
Who will offer the first negative rate mortgage
Little did we know that just minutes after our tweet, we would learn that at least one place is already paying homeowners to take out a mortgage. That’s right – the negative rate mortgage is now a reality.Thanks of Mario Draghi’s generosity with “other generations’ slavery”, and following 3 consecutive rate cuts by the Danish Central Bank, a local bank – Nordea Credit – is now offering a mortgage with a negative interest rate! This means, according to DR.dk, that Nordea have had to pay instead of charging interest to to a handful of customers, says housing economist at Nordea Kredit, Lise Nytoft Bergmann for Finance.
From DR, google-translated:
The interest rate has balanced around 0 in a level between minus 0.03 percent plus 0.03 percent. Most have paid a modest positive interest rate, but there are so few who have had a negative rate. It is quite an unusual situation, says Lise Nytoft Bergmann.
It is residential customers who have chosen to stick with F1-loan that now benefit from the negative interest rate. F1 loan form has otherwise been strong returns in recent years in favor of fixed interest loan.
Although interest rates are negative, it is not something that can be felt by customers as contributions and other costs continue to be paid. In turn, interest will be deducted from the contribution.
Precisely because it is an unusual situation, Nordea Kredit’s IT systems are not geared to the situation when the computers are only used to collect interest.
Lise Nytoft Bergmann says that there is no cause for concern, and that the new situation can be handled, “but sometimes we have to use duct tape and paste.”
This is just the beginning: according the Danish media outlet, as a result of variable-refinancing, as recently as a week from now “a greater share of customers could have a negative rate.”
Mortgage Denmark is one of the mortgage banks, where F1 rate also is close to zero, and here you are very excited about the upcoming negotiations, says Christian Hilligsøe Heinig, chief economist of the Mortgage Denmark.
We have an auction just around the corner and it is very exciting to see how interest rates are going. We can go and get negative interest rates, says Christian Hilligsøe Heinig to JP Financial.
And just like that, first in Denmark, and soon everywhere else in Europe, a situation has now emerged where savers who pay the bank to hold their cash courtesy of negative deposit rates, are directly funding the negative interest rate paid to those who wish to take out debt. In fact, the more debt the greater the saver-subsidized windfall.
That all this will end in blood and a lot of tears is clear to anyone but the most tenured economists, however in the meantime, we can’t wait to take advantage of the humorous opportunities that Europe (and soon Japan and the US) will provide in the coming months, as spending profligacy will be directly subsidized and funded by the insolvent monetary system, while responsible behavior and well-paid labor will be punished, first with negative rates and soon thereafter: with threats, both theoretical and practical, of bodily harm.
h/t @AndreasBay
Interest rate on my first mortgage in 1990 10 1/8%, refinanced to 7 1/2% three years later.Currently it stands at just over 4%. Thank god my mortgage will paid paid off in the next two years.
Bob.
BostonBob
You can retire to Copenhagen and have a Danish bank pay you to live in one of their houses. It’s a can’t miss opportunity of a lifetime. Buy 10 houses and you’ll become rich.
I have lived in Amsterdam, Paris, London, and Frankfurt at different times in my life. And loved it. However moving to Denmark or any of the Scandinavian countries carries one huge drawback. That being their languages! While English is common and spoken by most everyone under the age of forty, it’s only when you speak the native language that you can begin to fully participate in their society. Sadly, their languages are onerous and sound like children on a playground grunting at each other rather than any of the romance languages. If you are willing to go there and stay mainly in the major cities, finding those english speaking persons in everyday life is not difficult. But if you should settle in the far reaches away from major cities, it’s possible you will be the only person for 50 miles Beautiful countries, outrageous taxes and social benefits like no other, but the language is definitely a drawback. The other reason to avoid them is of course their willingness in times past to allow Islamic followers to immigrate into their countries which of course is now causing all sorts of conflicts and has produced near riot states as the ordinary citizens are sick of putting up with the incessant demands of Islam. The Islamic immigrants may well find themselves deported from these countries or face violence if they insist on staying.