Denmark bank to pay borrowers on taking house loans

COPENHAGEN: A bank in Denmark is paying home-buyers to take out mortgages, the world media reports said.

The country’s third-largest lender, Jyske Bank has announced this month a mortgage rate of -0.5 per cent.

The bank has launched the first negative interest rate mortgage in the world, a media report said. The bank will offer borrowers a 10-year deal at -0.5% — meaning borrowers will still make monthly payments, but the amount outstanding will be reduced each month by more than the borrower has paid.

Central banks easing interest rates for years around the world, distorting the traditional economics of lending and borrowing. The trend is most pronounced in Europe, where a composite home-loan rate across the euro area fell to 1.65 per cent in June.

Borrowing costs are at or near rock-bottom in many major world markets. The trend has boosted demand from home-buyers and spurred fierce competition among lenders for their business.

The negative interest offering by Jyske Bank is due to the fact that the can go into money markets and borrow from institutional investors at a negative rate and is in turn passing this deal along to customers, an official of the bank said.

Many major central banks have lowered interest rates in the last few years, hoping to stoke growth and stave off a downturn. Central banks in New Zealand and Thailand are among recent banks to announce cuts to interest rates.