5 ms·

only a matter of time when we start seeing negative rates on mortgages.

by tempsy 6y ago

mmastrac 6y ago
Or on savings accounts
- bzb6 6y ago
  Don’t we have that already? Mandated by the ECB
- tveyben 6y ago
  We already have this at least here in Denmark. Some banks have a cap (EG 50K DKr or 250K Dkr). https://blog.nord.investments/hvordan-undgar-du-de-negative-renter-i-banken/ https://blog.nord.investments/hvordan-undgar-du-de-negative-...
api 6y ago
If that happens house prices will go apeshit.
- asdfasgasdgasdg 6y ago
  There's not a significant difference between a 0% and a -0.125% mortgage. If one doesn't cause weird changes to the housing market I don't expect the other to.
  - vageli 6y ago
    There's not a significant difference between 0°C and 1°C either, but drastic changes occur at one and not the other.
    - asdfasgasdgasdg 6y ago
      0C was the number given to that temperature specifically because that's where drastic changes occur in water. With most materials, there is no significant difference between 0C, -1C, and 1C. On the other hand, 0% has no known special relationship with the housing market, so there's not really a good reason to expect substantially different behavior at that value compared to -.125% or +.125%.
- ghshephard 6y ago
  What's the argument for negative interest rates having any impact on house prices? I would think it would be mostly linear compared to 2%, 1%, 0%, -1%, etc... For example - if I have a 20 year mortgage on a $240,000 house @ 0%, I have to pay $1,000/month. If the interest rate is -1% then I have to pay ~$900/month. I don't know if that extra $100/month really moves the market on home prices that much.
  - wrsh07 6y ago
    I think at that point everyone should be incentivized to hold a mortgage At the very least that increases demand for housing dramatically
  - bluedevil2k 6y ago
    People would be incentivized to buy the absolute most expensive home they qualify for, which isn’t always a good thing. Dove sorry is the key to investments.
    - war1025 6y ago
      > Dove sorry is the key to investments. What does this mean? I am at a loss.
      - nostrademons 6y ago
        I assume it's an autocorrect from "diversity".
        api 6y ago
        Mobile is the foot rub (autocorrect of "mobile is the future" I saw once).
    - Robin_Message 6y ago
      I'm guessing "dove sorry" is diversity, but who knows!
  - 6y ago
arnon 6y ago
We already had that last year here in Denmark :) https://www.cnbc.com/2019/08/12/danish-bank-is-offering-10-year-mortgages-with-negative-interest-rates.html https://www.cnbc.com/2019/08/12/danish-bank-is-offering-10-y...
lumost 6y ago
At the end of the day isn't this just a regressive tax in favor of land owners? How many compounding cycles would it take before no one cares about a wipe out in land valuation as it's primarily owned by the extremely wealthy.
- onlyrealcuzzo 6y ago
  In the US, >67% people own their homes: https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N Homeowners view this as a zero-sum game. If the 33% of non-homeowners are losing (and they definitely are), than the 67% of homeowners feel they must be winning (even though, arguably, the majority of them aren't).
  - lumost 6y ago
    As the price of homes rises, wouldn't you expect the 67% to shrink? fewer individuals would have the capital to afford a down payment, and some portion of the 67% will liquidate the equity for retirement and other activities.
    - onlyrealcuzzo 6y ago
      Historically, there hasn't been a lot of correlation here. I agree with your logic - it seemingly would make sense.
useerup 6y ago
I have -0.28% on a mortgage which will be refinanced every 5 year. The lenders actually pay me to store their capital. Weird times. In actuality, though, I also pay a 0.5% "contribution" fee which covers mortgage company administration and collective risk. So the effective rate is around 0.22%. For the 20y bonds the 0% interest is also just the actual bond rate. The administration fee will have to be added. The "contribution" fee rate depends on how much of the home value has been mortgaged. Below 60% it is typically around 0.5% because of the relatively low risk (you can probably always auction off the house at get at least 60% even in bad times). When mortgaged from 60 to 80% of the home value the fee is higher.
Hamuko 6y ago
The interest rate on my mortgage is MAX(12 months Euribor rate, 0%) + 0.5%. Apparently some banks didn't realise to do the MAX() back in the day because surely the Euribor rates are not going to be negative, so there were some instances of negative mortgage rates here.

only a matter of time when we start seeing negative rates on mortgages.

by tempsy 6y ago

only a matter of time when we start seeing negative rates on mortgages.

mmastrac 6y ago

Or on savings accounts

bzb6 6y ago
Don’t we have that already? Mandated by the ECB
tveyben 6y ago
We already have this at least here in Denmark. Some banks have a cap (EG 50K DKr or 250K Dkr). https://blog.nord.investments/hvordan-undgar-du-de-negative-renter-i-banken/ https://blog.nord.investments/hvordan-undgar-du-de-negative-...

api 6y ago

If that happens house prices will go apeshit.

asdfasgasdgasdg 6y ago
There's not a significant difference between a 0% and a -0.125% mortgage. If one doesn't cause weird changes to the housing market I don't expect the other to.
- vageli 6y ago
  There's not a significant difference between 0°C and 1°C either, but drastic changes occur at one and not the other.
  - asdfasgasdgasdg 6y ago
    0C was the number given to that temperature specifically because that's where drastic changes occur in water. With most materials, there is no significant difference between 0C, -1C, and 1C. On the other hand, 0% has no known special relationship with the housing market, so there's not really a good reason to expect substantially different behavior at that value compared to -.125% or +.125%.
ghshephard 6y ago
What's the argument for negative interest rates having any impact on house prices? I would think it would be mostly linear compared to 2%, 1%, 0%, -1%, etc... For example - if I have a 20 year mortgage on a $240,000 house @ 0%, I have to pay $1,000/month. If the interest rate is -1% then I have to pay ~$900/month. I don't know if that extra $100/month really moves the market on home prices that much.
- wrsh07 6y ago
  I think at that point everyone should be incentivized to hold a mortgage At the very least that increases demand for housing dramatically
- bluedevil2k 6y ago
  People would be incentivized to buy the absolute most expensive home they qualify for, which isn’t always a good thing. Dove sorry is the key to investments.
  - war1025 6y ago
    > Dove sorry is the key to investments. What does this mean? I am at a loss.
    - nostrademons 6y ago
      I assume it's an autocorrect from "diversity".
      - api 6y ago
        Mobile is the foot rub (autocorrect of "mobile is the future" I saw once).
  - Robin_Message 6y ago
    I'm guessing "dove sorry" is diversity, but who knows!
- 6y ago

arnon 6y ago

We already had that last year here in Denmark :) https://www.cnbc.com/2019/08/12/danish-bank-is-offering-10-year-mortgages-with-negative-interest-rates.html https://www.cnbc.com/2019/08/12/danish-bank-is-offering-10-y...

lumost 6y ago

At the end of the day isn't this just a regressive tax in favor of land owners? How many compounding cycles would it take before no one cares about a wipe out in land valuation as it's primarily owned by the extremely wealthy.

onlyrealcuzzo 6y ago
In the US, >67% people own their homes: https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N Homeowners view this as a zero-sum game. If the 33% of non-homeowners are losing (and they definitely are), than the 67% of homeowners feel they must be winning (even though, arguably, the majority of them aren't).
- lumost 6y ago
  As the price of homes rises, wouldn't you expect the 67% to shrink? fewer individuals would have the capital to afford a down payment, and some portion of the 67% will liquidate the equity for retirement and other activities.
  - onlyrealcuzzo 6y ago
    Historically, there hasn't been a lot of correlation here. I agree with your logic - it seemingly would make sense.

useerup 6y ago

I have -0.28% on a mortgage which will be refinanced every 5 year. The lenders actually pay me to store their capital. Weird times. In actuality, though, I also pay a 0.5% "contribution" fee which covers mortgage company administration and collective risk. So the effective rate is around 0.22%. For the 20y bonds the 0% interest is also just the actual bond rate. The administration fee will have to be added. The "contribution" fee rate depends on how much of the home value has been mortgaged. Below 60% it is typically around 0.5% because of the relatively low risk (you can probably always auction off the house at get at least 60% even in bad times). When mortgaged from 60 to 80% of the home value the fee is higher.

Hamuko 6y ago

The interest rate on my mortgage is MAX(12 months Euribor rate, 0%) + 0.5%. Apparently some banks didn't realise to do the MAX() back in the day because surely the Euribor rates are not going to be negative, so there were some instances of negative mortgage rates here.