A bank in Denmark is offering borrowers mortgages at a negative interest rate, effectively paying its customers to borrow money for a house purchase. Jyske Bank, Denmark's third-largest bank, said this week that customers would now be able to take out a 10-year fixed-rate mortgage with an interest rate of -0.5%. To put the -0.5% rate in simple terms: If you bought a house for $1 million and paid off your mortgage in full in 10 years, you would pay the bank back only $995,000. It should be noted that even with a negative interest rate, banks often charge fees linked to the borrowing, which means homeowners could still pay back more.
Jyske Bank's negative rate is the latest in a series of extremely low interest offers from Danish banks to homeowners. It should also be noted that negative rates have been available on short-term mortgage bonds in Denmark since May.
It may seem counter-intuitive for banks to lend out their money at such low rates — but there is a rationale behind it and driven by fear. Financial markets are in an especially volatile and uncertain spot right now. Factors include the US-China trade war, Brexit, and a generalized economic slowdown across the world — noticeable especially in Europe. Many investors are fearing a substantial crash in the near future. As such, some banks are willing to lend money at negative rates, accepting a small loss rather than risking a bigger loss by lending money at higher rates that customers cannot meet. It shows how scared some European investors are of the current situation in the financial markets, and that they expect it to take a very long time before things improve.