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.

 

一家丹麦银行推出了世界首例负利率按揭贷款——房贷年利率为-0.5%。

 

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%.

 

Under its negative mortgage, Jyske said borrowers will make a monthly repayment¹ as usual – but the amount still outstanding will be reduced each month by more than the borrower has paid.

 

"We don't give you money directly in your hand, but every month your debt is reduced by more than the amount you pay," said Jyske's housing economist², Mikkel Høegh.

 

The mortgage is possible because Denmark, as well as Sweden and Switzerland, has seen rates in money markets drop to levels that turn banking³ upside-down.

 

Høegh said Jyske Bank is able to go into money markets and borrow from institutional investors⁴ at a negative rate, and is simply passing this on to its customers.

 

But the flipside is that savers will see nothing paid in interest on their deposits - and may also suffer as they go negative.

 

While the Bank of England's base rate is 0.75%, and the European Central Bank's main rate is zero, in Denmark (which is not in the eurozone) the equivalent rate is -0.4%.

 

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 compensate⁵ the bank for arranging the deal, even when the nominal⁶ rate is negative.

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