Negative Interest Rates: Danish Bank Unit Pays Interest to a Borrower

August 17, 2019 | Alternative Investments, News
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For the first time ever, Realkredit Danmark pays loan interest to customers

Negative interest rates are hitting Danish bank. Want to take out a mortgage? Well, banks now incentivize you to do so in a negative interest rate environment.

We’re heading into a world that will have these consequences. We’ll see more lenders paying out interest to borrowers (rather than the other way round).

These payouts are likelier in the case of variable interest loans, where interest rates are set more frequently, compared to fixed-rate mortgage loans. Also, these payments usually arise as final adjustments at the end of the loan tenure.

Negative interest rates drive discussions in Denmark

Following this news, Danish borrowers are likely to carefully scrutinize loan offers and arrangements to identify the possibility of negative interest payouts.

Want a 10-year mortgage? It’s hard to say now to the numbers.

Jyske Bank, Denmark’s third-largest lender, set a mortgage rate in August of -0.5%, before fees.

Nordea Bank announced a 30-year mortgage at interest of 0.5%. Its 20-year option carries no interest.

However, there could be fine print in loan agreements relating to lenders’ costs, duration of the loan, and its type that could allow the lender to decline passing on any gain from negative interest structures.

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