It was fascinating to read recently that a Danish mortgage lender will offer a 20 year mortgage at 0%.
This is not a total surprise; Danish lenders first issued 20-year bonds with 0% returns a few years ago, and they have a history of negative central bank rates in an effort to leverage the size of their economy.
Like the rest of the world's developed economies, Danish homeowners have experienced sustained falls in interest rates for some time. Australia has maintained a historically low interest rate of 0.1 since November 2020 - and with current economic conditions, shows no signs of being taken off hold.
Further exacerbated by COVID-19, central banks' around the world continuing to enact expansionary policy lead the question: will we experience negative interest rates? And is this something we want?
Negative interest rates around the world [EDIT]
First some background - back in 2012, policy makers drove Denmark's main rate below zero to defend the krone's peg to the euro. Since then, Danish homeowners have enjoyed continuous slides in borrowing costs, enabling increased discretionary income and continued spending.
The once unthinkable notion of borrowing for two decades without paying interest comes as central bankers across the globe shy away from rate hikes. No major western central bank is likely to raise rates this year, according to Bloomberg's quarterly review of monetary policy.
Totalkredit, a unit of Denmark's largest mortgage lender, Nykredit Realkredit A/S, says it will also offer 20-year loans at 0 per cent. Danske Bank A/S, Denmark's biggest bank, has signalled it may follow suit.
. This is the first time since then that such a product has returned to the shelves.
Demand is there, Lisa Bergmann, chief housing economist at Nordea Kredit, said in a note. The bond is likely to price close to a record high, she said.
Accepting a negative interest rate in Australia?
No - why