A Denmark Bank Is Offering 10 Year Fixed Rate Mortgages At Negative 0.5%. Yes, You Read That Right.

It was reported last week that a bank in Denmark is willing to sign 10 year contracts with their customers that will obligate them to pay the mortgage holder .5% of it’s total value for 10 years.

Below is a snapshot from their website


https://translate.google.com/translate?hl=en&sl=da&u=https://www.jyskebank.dk/&prev=search

Of course, the bank isn’t going to give people money outright. Basically what is going on is they are offering the mortgage at a premium to the fair value. For instance, if somebody wanted to borrow $100 000, they would have to pay back $105 000, but they will be paid .5% of the principle on a yearly basis. The bank also makes money on fees.



Average mortgage rates in Europe are much lower compared to the United States


courtesy zillow.com

German and Danish debt to gdp is also about 1/2 the size of of the United States


Germany


United States

Denmark


People are also willing to pay significantly more for German and Danish bonds.


courtesy mishtalk
courtesy mishtalk

Maybe the Germans can get away with it right now? Regardless, the idea of lenders paying borrowers will never sit right. Read more at Bloomberg


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