Danish bank launches historic loan at negative interest rates – The Economic Journal


Danish bank Jyske Bank launched the world's first negative interest-rate home loan, distributing ten-year homeowners loans at an annual rate of – 0.5%. The Danish banking institution will pay borrowers so that they can then pay back less than they borrowed.

Denmark's third largest bank recently announced that it began offering borrowers a 10-year contract at -0.5% after another Danish bank, the renowned Nordea, revealed that it would start offering 20-year contracts at 0% and 0.5% to 30 years.

In a statement, Jyske Bank clarified that customers will continue to make the monthly payment as usual, but the outstanding amount will be reduced each month. “We don't give you the money directly in your hand, but every month your debt will be reduced by more than the amount you paid,” explained Mikkel Høegh, Jyske's housing economist.

The bank's clarification even has a series of questions and answers such as: 'How is this possible?' 'Yes, I almost don't understand either, but we have analyzed the extremes well and it may be very possible to have an interest rate negative"

In Portugal, the law obliging credit institutions to fully reflect Euribor's decline in mortgage loans entered into force on 19 July 2018. The legislation in question applies to credit agreements to finance the purchase. or the construction of own permanent, secondary or rental housing.

“By virtue of these rules, in situations where the sum of the index with the spread result in a negative interest rate, credit institutions are required to fully reflect this rate in the amounts payable by customers under the contracts in question, ”says Banco de Portugal. Thus, banks may choose to “deduct the negative amount from the outstanding principal on the installment due” or “constitute a credit to the customer, which shall be deducted from the interest accruing as soon as it becomes positive” , according to the central bank.

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