If you’re struggling to become a homeowner, you’re not alone. But a Danish bank is hoping to make the process a little bit easier by offering mortgages at a negative interest rate.
Jyske Bank, the third-largest bank in Denmark, will allow customers to take out a 10-year fixed-rate mortgage with an interest rate of -0.5%. In effect, customers will end up paying back less than the amount they borrowed through the loan, meaning they’ll actually earn money to buy a home.
“In practical terms, it will be expected that the mortgage loan repayment will be greater than it would be with a positive interest rate,” Mikkel Høegh, Jyske Bank housing economist, said in a press release. “The negative interest rate will act as a ‘subsidy’ to the repayment. And the repayment portion will become smaller and smaller as the debt is reduced.”
At 10 years, the mortgages are a lot shorter than a conventional 30-year mortgage. This time crunch could make it more difficult for borrowers to pay it off because of the higher monthly payments.
For this reason, the mortgage will likely work best for people looking to buy old homes in need of major improvements.
“It’s not a loan aimed at people who are going out and buying new housing, but more towards people who want to improve the housing,” Høegh told the Copenhagen Post.
Jyske Bank’s unprecedented offer comes at a time when another Danish bank, Nordea Bank Abp, will begin offering 20-year fixed-rate loans with zero interest.
Even in the United States, the 30-year fixed-rate mortgage slipped to 3.6%, according to Freddie Mac. That’s the lowest it’s been since November 2016.
In turn, home prices are expected to continue to rise.
“It’s never been cheaper to borrow,” Lise Nytoft Bergmann, chief analyst at Nordea’s home finance unit in Denmark, told Bloomberg. “We expect this to contribute to driving home prices higher.”
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