Negative Interest Rate Mortgages
We have entered the era of negative rates and in Denmark, many families are getting paid to take a mortgage, sounds insane, but it’s true. Hans Peter Christensen family is a perfect example of this phenomenon. They purchased the home for 1.7 million Danish Kroner, roughly equivalent to $261,000 with a mortgage rate of -0,0562%
Their quarterly interest Payment : – 249 Danish Kroner or -$38.
One of Denmarks Largest banks (Realkrdit Denmark) issued 758 mortgages with negative interest rates last year and the number will probably rise this year. Talk about having your cake and your pie.
Negative Interest Rate Mortgages: A New Trend?
“My parents said I should frame it, to prove to coming generations that this ever happened,” said Mr. Christensen, a 35-year-old financial consultant, about his bank statement.
Denmark isn’t the only place where central bankers are experimenting with negative rates. The European Central Bank and the Bank of Japan, grappling with stagnant economies, are using subzero rates to stimulate growth. Switzerland and Sweden, like Denmark, are trying negative rates to keep their currencies in line with the struggling euro. Full Story
The concept of QE for the people that we joked about a few months ago might actually come to fruition. To ensure a monstrous bubble, you implement measures that prevent the majority from getting in for a long time, and in doing you artificially create an insatiable to desire. Then you remove these insane curbs, and you provide incredibly low mortgage rates. In such a scenario, almost everything is in place for a bubble.
Negative rates and bubbles
Current demand is huge, but barriers are large, and the US will be forced to gravitate towards negative rates. Expect the government to suddenly make it easier to own a home. Once upon a time, you only had to scratch X on the mortgage application form to be approved. In the future, they might simply insist you sign your name clearly before issuing you a mortgage.
A massive bubble cannot be started without the masses and to make massive amounts of money, the masses have to be fleeced. Pay attention closely to the mortgage markets; it will give you clues as to when the bankers will make it easier to get a mortgage. Subprime loans are already making a comeback, so we are slowly creeping to the next bubble. Housing stocks might end up being a better play once the housing market opens up. When we get to this stage, we will issue several strategies. In the meantime, overall housing is still a good play but look for deals.