Friday, Jan 08, 2021

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Bloombergquint: Danes Get 20-Year 0% Mortgages

Will this make the price of a house rise to the point where it is 20 x 12 times the monthly rental price for a similar house in the area? And will the price then stabilise there? It seems that most people aren't bothered about the actual price they agree to pay for the house, but only their monthly outgoing.

Posted by cornishman @ 08:25 AM (835 views)
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1. cornishman said...

Was it the exclamation mark title that messed up the previous post?

Friday, January 8, 2021 08:27AM Report Comment

2. mombers said...

@cornishman the thing is the monthly payment is 100% capital, so the owner's net worth goes up every month by the mortgage amount. This is provided prices don't go down by more than the monthly mortgage payment, but even then it's a paper loss. There is also the matter of maintenance and insurance, which is included in rent. At 1.59%, my payment is almost 2/3 capital and this proportion gets bigger every month. In a proper market, the cost of housing would be roughly the same for renters and owner occupiers, this has been the case in the past with proper interest rates and higher property taxes.

I'd be delighted if my house went down in value by half by the time my mortgage is paid off because my children would face a far lower burden on their own housing costs.3 homes generally cost more than 1!

Friday, January 8, 2021 12:44PM Report Comment

3. nickb said...

@2 it's a paper loss so long as you don't have to sell.
Curiously where I live in the SE the price of my rental house with positive interest rate prevailing would be more than 12 X rent X 20, and also more than 12 x rent x 25! So why should it stop there in Denmark?

Friday, January 8, 2021 01:48PM Report Comment

4. mombers said...

@3 we're lucky enough to not have had to speculate on the 'ladder' i.e. we bought a flat that would have seen our family out at a push, then bought a house that will definitely see us out. Would have been able to afford a much better house had our flat not gone up in value so much :-(

Millions of people are stuck on the gottverdammte 'ladder' as the rungs have gotten further apart, unable to contemplate starting/expanding a family or moving to a better job etc.

Friday, January 8, 2021 03:46PM Report Comment

5. cornishman said...

A 20-year interest free mortgage seems like a no-brainer to me. Going by the way that the government has thrown money around recently, I can't see it allowing house prices to find a lower level in the long term. Rather it will probably start giving everyone a few thousand a year to keep things moving along.

As mombers says, each £ that you pay every month will still belong to you - as equity in the house.

Saturday, January 9, 2021 01:02PM Report Comment

6. deepak said...

This is nothing new in mainland Europe. I have also seen negative mortgages for a few year (not 20 years) back in 2009.
The problem was you buying a Euro 200,000 for 500,000. Not only over paying yourself but also causing trouble for others.

Monday, January 11, 2021 11:49PM Report Comment

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