In Denmark You Are Now Paid To Take Out A Mortgage

[Ares]

With NIRP raging in the Eurozone and over €1.5 trillion in European government bonds trading with negative yields, many were wondering when any of this perverted bond generosity will spill over to other debtors, not just Europe's insolvent governments (who can only print negative interest debt because of the ECB's backstop that it will buy any piece of garbage for sale in the doomed monetary union). In fact just earlier today we, rhetorically, asked a logical - in as much as nothing is logical in the new normal - question:
zerohedge @zerohedge
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Who will offer the first negative rate mortgage
11:46 AM - 30 Jan 2015

Little did we know that just minutes after our tweet, we would learn that at least one place is already paying homeowners to take out a mortgage. That's right - the negative rate mortgage is now a reality.

Thanks of Mario Draghi's generosity with "other generations' slavery", and following 3 consecutive rate cuts by the Danish Central Bank, a local bank - Nordea Credit - is now offering a mortgage with a negative interest rate! This means, according to DR.dk, that Nordea have had to pay instead of charging interest to to a handful of customers, says housing economist at Nordea Kredit, Lise Nytoft Bergmann for Finance.

From DR, google-translated:

The interest rate has balanced around 0 in a level between minus 0.03 percent plus 0.03 percent. Most have paid a modest positive interest rate, but there are so few who have had a negative rate. It is quite an unusual situation, says Lise Nytoft Bergmann.



It is residential customers who have chosen to stick with F1-loan that now benefit from the negative interest rate. F1 loan form has otherwise been strong returns in recent years in favor of fixed interest loan.



Although interest rates are negative, it is not something that can be felt by customers as contributions and other costs continue to be paid. In turn, interest will be deducted from the contribution.



Precisely because it is an unusual situation, Nordea Kredit's IT systems are not geared to the situation when the computers are only used to collect interest.



Lise Nytoft Bergmann says that there is no cause for concern, and that the new situation can be handled, "but sometimes we have to use duct tape and paste."

This is just the beginning: according the Danish media outlet, as a result of variable-refinancing, as recently as a week from now "a greater share of customers could have a negative rate."

Mortgage Denmark is one of the mortgage banks, where F1 rate also is close to zero, and here you are very excited about the upcoming negotiations, says Christian Hilligsøe Heinig, chief economist of the Mortgage Denmark.



We have an auction just around the corner and it is very exciting to see how interest rates are going. We can go and get negative interest rates, says Christian Hilligsøe Heinig to JP Financial.

And just like that, first in Denmark, and soon everywhere else in Europe, a situation has now emerged where savers who pay the bank to hold their cash courtesy of negative deposit rates, are directly funding the negative interest rate paid to those who wish to take out debt. In fact, the more debt the greater the saver-subsidized windfall.

That all this will end in blood and a lot of tears is clear to anyone but the most tenured economists, however in the meantime, we can't wait to take advantage of the humorous opportunities that Europe (and soon Japan and the US) will provide in the coming months, as spending profligacy will be directly subsidized and funded by the insolvent monetary system, while responsible behavior and well-paid labor will be punished, first with negative rates and soon thereafter: with threats, both theoretical and practical, of bodily harm.

http://www.zerohedge.com/news/2015-01-30/denmark-you-are-now-paid-take-out-mortgage

[Hatha Sunahara]

In a sane world that would make absolutely no sense. Reminds me of Ben Franklin who said "A penny saved is a penny earned." Also "Neither a lender nor a borrower be". Is this 'fractional reserve banking in reverse? I'm trying to sort out what this does for the systemic usury the bankers impose in their positive interest rate lending. If they charge borrowers 5% interest for loans, and they have to keep 10% reerves, then on a $1,000 deposit, a bank would charge a -2% (minus 2%). So in a year the depositor would pay them $20. On the lending side, if they charge -5%, then they would pay borrowers $50 in the first iteration (for the $1000 loan), and they would have to keep $100 as reserves, so in the second iteration they loan out $900 and pay the borrower -5% or $45. On the third Iteration, after holding another 10%, they lend out $810 at -5%, and pay the borrower $40.50 in interest. In the third iteration they pay out 36.45. You can see where this is going. Overall, a $1000 deposit allows them to lend about $9000 at a negative interest rate of 5%, which costs the system in total $450. The depositors would pay only $20 of this, so the banks would end up with a net COST of lending tied to a $1000 deposit of $430. The only way this could work is if they charged the depositors a huge negative interest for saving their money, in which case nobody would deposit their savings in banks. It would cause huge reductions in deposits. People would take their money out of the bank and buy gold which would net them huge returns as the price of gold spiked.

I seriously doubt that banks will pay people to borrow money. They are usurers--not philantropists. They understand the math better than the average person. So, whoever is claiming that European banks will be paying people to borrow money is sowing seeds of false hope. This is never going to happen.

This train of logic I just laid out is why I always believed that negative interest rates were only for depositors--and only a polite way of characterizing a 'voluntary haircut'. If the bankers were going to give themselves a haircut it would be big news. They wouldn't be so reluctant to let the Greek government declare bankruptcy (or anybody else for that matter). The idea of Too Big to Fail doesn't involve business practices that make you smaller. They are in the business of robbing people--not losing money. This is a hoax.


Hatha

[mick silver]

so if this is the case the banks are giving free money to takers , would this not be a melt down of the junk we all call money

[Hatha Sunahara]

so if this is the case the banks are giving free money to takers , would this not be a melt down of the junk we all call money



Yes it would. It would also subvert the source of their power, which is your (and my) sense of indebtedness for money which they conjured up from thin air. It would lay bare their scam for all to see.

Hatha

[Twisted Titan]

Banks will NEVER pay anybody to take a loan that is absolute poppycock.

The only negative interest rates that will apply is for a bank to hold your money and you pay them and ADDITIONAL fee for the privilage of creating multiple wall between you and your funds.