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Negative Interest Rate Mortgages

bruncher
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Negative Interest Rate Mortgages

#244085

Postby bruncher » August 13th, 2019, 8:35 pm

The Guardian reports that Danish Bank Jyske has introduced a negative interest rate mortgage, with other banks expected to follow. Apparently there's a 10 year deal at -0.5%

Could this happen in the UK? Anyone see an impact on the banks?

toofast2live
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Re: Negative Interest Rate Mortgages

#244567

Postby toofast2live » August 15th, 2019, 5:20 pm

Impact on European banks already obvious. Share prices have been caned and some - spanish and german - going up in smoke.

Lending money at -0.5% only makes sense if you can pay savers interest rates of -1% or more. In effect you would be paying the bank for storing your money safe and protected. It's why Gold is booming as a traditional store of value whereas depositing funds at negative rates guarantees destruction of value.

hiriskpaul
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Re: Negative Interest Rate Mortgages

#244715

Postby hiriskpaul » August 16th, 2019, 10:31 am

bruncher wrote:The Guardian reports that Danish Bank Jyske has introduced a negative interest rate mortgage, with other banks expected to follow. Apparently there's a 10 year deal at -0.5%

Could this happen in the UK? Anyone see an impact on the banks?

Jyske will be making money out of this as they will be able to securitise at an even lower rate and charge fees to cover their costs. This means that there are institutions that are prepared to invest in DKRs for even lower returns. What is interesting/troublesome is that these institutions consider this to be a good investment.

This is not some act of desperation or foolishness by Jyske, which is a very robust bank. In the 2018 EU stress tests Jyske did much better than Lloyds, Barclays and RBS (as did most other major EU banks).

I think it unlikely this would happen in the UK in the short to medium term.

88V8
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Re: Negative Interest Rate Mortgages

#244735

Postby 88V8 » August 16th, 2019, 11:04 am

Hmmm. Will there be contagion, with weaker banks following suit.
Can't help feeling we're on the slide towards the next crash, and central banks have already fired off their ammunition.
I'm looking anew at my excessive exposure to Financials.

V8


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