IN EUROPE, MORTGAGE LENDERS PAY BORROWERS

In Portugal and Denmark, where commercial interest rates have dipped below zero, some people with mortgages collect monthly payments from their lenders.

Negative mortgage interest rates made their debut in 2014 when the European Central Bank cut benchmark rates to -0.25 percent to spark the Eurozone’s lagging economy.

The arrangement was intended to be brief but the bank continued it to intubate the region’s failing economy through 2020’s financial collapse.

That overarching negative rate has driven variable mortgage rates at some commercial banks to move against the lenders.

In Portugal, some variable-rate mortgages are linked to the Euribor, the rate banks pay to borrow from each other. The rate in 2008 was about 5 percent; most recently, it was a record low -0.54 percent.

One mortgage holder who took her loan in 2008 received a $45 payment from her bank last month, even though she still is making mortgage payments. 

About 12 percent of mortgages held by Portugal’s Caixa Geral de Depositos have gone negative, roughly 50 percent more than in 2020, the Wall Street Journal reported.

Nykredit, Denmark’s largest mortgage lender, said more than half of its loans with a repayment period of up to ten years are now negative. The proportion is growing because rates are being adjusted, the bank said.

However, the bank adds an administrative charge to the mortgage payment, which allows the bank to stay in the black instead of paying borrowers.

Denmark’s benchmark interest rate has been negative since 2012. “We just got used to it,” one borrower told the WSJ.

In Spain, most mortgages also are tied to the Euribor. However, the country has passed a law that commercial interest rates can never fall into negative numbers.

TREND FORECAST: We note this article to further illustrate the unprecedented measures being taken to pump up failing economies. Despite these negative interest rates, much of Europe was heading into recession in late 2019, before the 2020 COVID War was launched.

Thus, when interest rates rise, as they will when inflation moves higher, the current slow-growth trends will reverse into the “Greatest Depression” as the cost of borrowing rises along with debt burdens. 

2 Comments
  1. Peter Arvedlund 1 week ago

    Greetings from the other side of the planet: Denmark. 🙂 Been follow GC for years and now with Greg man. also in the loop finally decided to become a subscriber of Trend Journal.
    Yes, I have refinanced again in 2021 my home with my wife. We now have – again – refinanced at an even lower NIR. We refinanced 3 years ago at a -0,1425% NIR. 3 years later now in March ´21 that has dropped to an even lower -0,2899%
    Could have been even lower at around -0,45% if we had refinanced yearly. But my wife wants “security” and predictability – so we bind it for 3 years at the time now.
    The NIR pays for around half of the refinancing fee and monthly admin fees that the “Bank” charges as means of having some kind of income on this.
    But it basically means that pretty much ALL the money we pay per quarter (we pay quarterly – not monthly) is paying off the actual principal. So its almost like putting money into a savings account every month.
    Interesting to see what´ll happen the coming years….

    /Peter

  2. John Walker 6 days ago

    Thanks for the comment

Leave a reply

©2021 The Trends Journal

Log in with your credentials

Forgot your details?