If you buy home in Denmark, mortgages at negative rates
The announcement of the nation's third most important Danish bank caused a sensation among potential buyers. On 5 August, Jyske Bank A / S began offering 10-year mortgages for a negative rate of -0.5%. But it wasn't the only one!
Another credit institution, the famous Nordea Bank Abp, seems to have followed in the footsteps of the aforementioned bank, emerging on the others with a really intriguing promise for investors: fixed-rate mortgages for a good 20 years with a practically zero interest rate and to make matters worse, even 30-year loans at 0.5%.
But the reality is not so simple. Indeed, it is necessary to get to the heart of this analysis to understand why and especially the implications of these drastic choices.
What does it mean, financially speaking, to have negative rates? Generally the adoption of these targeted policies takes place when the lenders are wary of the markets to which they are directed. A sort of extra guarantee to be able to build loyalty with a potential customer.
Indeed, according to recent economic studies, in anticipation of the coming years, it seems that the banks will also be willing to enter a loss in order to accommodate a larger number of investors. The game is worth the candle ? For the moment yes, considering that the slice, in percentage terms, of buyers has increased exponentially compared to previous years.
In Europe, the main countries introduced this policy five years ago as a kind of very short-term solution. Why? Well, the answer is more than obvious. After the crisis, which started in the US and invaded the entire globe, it was necessary, almost mandatory, to introduce a swift and effective change of direction. And what better way than to speed up the national economy through banks? A reverse process to the so-called ‘’ Bail-in ‘’. It is the banks that save the state!
Negative rates also encourage companies to borrow large amounts of money, and then reinvest it in the economy, national or otherwise. As the Journal says, "when a dollar is invested and enters the economic circle, it is as if it were spent twice".
A simple but clear example will be effective to better understand what we are referring to.
If you are supposed to spend a dollar on a business, net of taxes, the owner of the business will spend the same amount even outside of its business. Thus, the initial financial need will fuel new, even bigger and hopefully more virtuous, economic circles.
Therefore, the interest towards the Danish economy is increasing more and more, with increasingly lower and negative rates and more cash circulation, which means, on a psychological level, more satisfied and undoubtedly more eager customers to invest, with no risk at all. horizon !
Another credit institution, the famous Nordea Bank Abp, seems to have followed in the footsteps of the aforementioned bank, emerging on the others with a really intriguing promise for investors: fixed-rate mortgages for a good 20 years with a practically zero interest rate and to make matters worse, even 30-year loans at 0.5%.
But the reality is not so simple. Indeed, it is necessary to get to the heart of this analysis to understand why and especially the implications of these drastic choices.
What does it mean, financially speaking, to have negative rates? Generally the adoption of these targeted policies takes place when the lenders are wary of the markets to which they are directed. A sort of extra guarantee to be able to build loyalty with a potential customer.
Indeed, according to recent economic studies, in anticipation of the coming years, it seems that the banks will also be willing to enter a loss in order to accommodate a larger number of investors. The game is worth the candle ? For the moment yes, considering that the slice, in percentage terms, of buyers has increased exponentially compared to previous years.
In Europe, the main countries introduced this policy five years ago as a kind of very short-term solution. Why? Well, the answer is more than obvious. After the crisis, which started in the US and invaded the entire globe, it was necessary, almost mandatory, to introduce a swift and effective change of direction. And what better way than to speed up the national economy through banks? A reverse process to the so-called ‘’ Bail-in ‘’. It is the banks that save the state!
Negative rates also encourage companies to borrow large amounts of money, and then reinvest it in the economy, national or otherwise. As the Journal says, "when a dollar is invested and enters the economic circle, it is as if it were spent twice".
A simple but clear example will be effective to better understand what we are referring to.
If you are supposed to spend a dollar on a business, net of taxes, the owner of the business will spend the same amount even outside of its business. Thus, the initial financial need will fuel new, even bigger and hopefully more virtuous, economic circles.
Therefore, the interest towards the Danish economy is increasing more and more, with increasingly lower and negative rates and more cash circulation, which means, on a psychological level, more satisfied and undoubtedly more eager customers to invest, with no risk at all. horizon !
