Jyske Bank said it will start issuing 10-year mortgages at a coupon of minus 0.5% and Nordea Bank will start offering zero-rate 20-year fixed mortgages, according to Bloomberg.
They spoke to Lise Nytoft Bergmann, the chief analyst at Nordea’s home finance unit: “It’s an uncomfortable thought that there are investors who are willing to lend money for 30 years and get just 0.5% in return,” she said. “It shows how scared investors are of the current situation in the financial markets, and that they expect it to take a very long time before things improve.”
This is madness. You can buy a house for 5m kr and pay them back less than that in 10 years. That has to end in a bubble.
Denmark finances its home loans through the world’s biggest covered-bond market. The securities are coveted as some of the safest around, thanks to the huge cover pools backing the debt. Even during the Napoleonic wars, when the kingdom of Denmark defaulted on its loans, the country’s mortgage-bond market carried on without any major disruptions.
The interest rate on a Danish homeowner’s mortgage is nominally the same as the coupon that investors get. As central banks from Frankfurt to Washington delay efforts to raise rates amid a worsening economic outlook, bond yields across much of the globe are sinking. In Denmark, rates have been negative for almost seven years as the central bank tries to defend the krone’s peg to the euro.