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Freki

Negative mortgage interest rates in Denmark

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This important piece was missed here I guess.

The world keeps spinning, but one would wonder if it really does.

https://www.bloomberg.com/news/articles/2019-05-23/bankers-stunned-as-negative-rates-sweep-across-danish-mortgages

Effectively people are getting paid to borrow. This is nuts. Completely bonkers. 

In France: rates are through the floor

image.png.e272bd686ed41e25fa427a6a2fa12b7d.png

How long can the plates keep spinning?

Are we going back to Germany 1930s with Zimbabwean hyper inflation due to the trust in currencies being eroded with those nutjobs called Carney, Draghi and Bernanke/Yellen?

Or are we first gonna see a massive deflation?

Goodness it is so insane, and as so many here, I don't know what to do. If I buy now: Case 1 I win big, Case 2 I lose big

Edited by Freki

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The record-low mortgage rates, which don’t take into account the fees that homeowners pay their banks, are the latest reflection of the global shift in the monetary environment as central banks delay plans to remove stimulus amid concerns about economic growth.

There's more to mortgages than the bond auction.

Put simply, if a bank has to pay the mortgagee money then the bank wont lend.

I dont follow Denmark. I know the HP are astronomically high in relation to earnings.

Do you see a flood of money going into mortgages?

Or do you see a countries banking system not lendign and  falling to bits?

 

 

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What better proof to show property is overpriced.....we will pay you money to borrow to buy something that is clearly not worth it........;)

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4 minutes ago, winkie said:

What better proof to show property is overpriced.....we will pay you money to borrow to buy something that is clearly not worth it........;)

A whole new angle on "my house makes more than I do"

28 minutes ago, spyguy said:

Or do you see a countries banking system not lendign and  falling to bits?

Apparently, people really are getting negative rates loans, not sure about mortgages.

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44 minutes ago, spyguy said:

The record-low mortgage rates, which don’t take into account the fees that homeowners pay their banks, are the latest reflection of the global shift in the monetary environment as central banks delay plans to remove stimulus amid concerns about economic growth.

There's more to mortgages than the bond auction.

Put simply, if a bank has to pay the mortgagee money then the bank wont lend.

I dont follow Denmark. I know the HP are astronomically high in relation to earnings.

Do you see a flood of money going into mortgages?

Or do you see a countries banking system not lendign and  falling to bits?

My conviction is that what those rates are doing is eroding confidence in central banks. They (Central Bankers) don't realise that, and think the MMT ( Modern Monetary Theory or Magic Money Tree) is not diluting confidence. If confidence in the Central Bank goes, 1929 could be mild compared to what awaits us ( yes this starts being doom porn territory)

Anyway, here I am, not knowing whether to sit on my hands or buy inflated assets.

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7 hours ago, winkie said:

What better proof to show property is overpriced.....we will pay you money to borrow to buy something that is clearly not worth it........;)

LOL that`s all i`m saying and where do i sign up for the free cash. 

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1 hour ago, longgone said:

LOL that`s all i`m saying and where do i sign up for the free cash. 

For me the question is whether or not tge worldwide property mania, sparked off by Britain, is sustainable.

Recently I came to believe that the bankers and politicians had found a way to continue the madness eternally and get away with it.

I no longer believe that they can. This rubbish is not sustainable but what the consequences will be one can only guess.

One certainty, the wealthy will come out on top. Somehow.

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3 hours ago, Bluestone59 said:

 

One certainty, the wealthy will come out on top. Somehow.

i guess that entirely depends on what "wealthy" actually means. 

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8 hours ago, adarmo said:

We got an interest bill from the Danish bank for our Danish subsidiary. 40k DK Because we have a lot of money deposited!

That's insane! Put it in my bank account and I'll charge you only 20k. Winner winner, chicken dinner?

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Why is this happening?  Does lending at a negative rate offset a cost elsewhere?  Mitigate a risk?  If its inflated fees and charges then borrowers will soon see through that and regulators will intervene.

Are these literally negative or just below base?

I don't understand why a lender would do this.

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12 hours ago, adarmo said:

We got an interest bill from the Danish bank for our Danish subsidiary. 40k DK Because we have a lot of money deposited!

 

3 hours ago, btd1981 said:

That's insane! Put it in my bank account and I'll charge you only 20k. Winner winner, chicken dinner?

Why?

Imagine we only had physical gold and silver bullion as money. If you were to store someone's cash at your house (i.e. act as their bank), you would charge them to cover the cost of installing a safe, hiring security and for the increased risk of being robbed.

Electronic banks still have to cover the cost of compliance with regulatory burden, the cost of access to the worldwide banking system, insurance against fraud or computer failure and the loss incurred when grannies hand their cash over to fraudsters and the bank has to reimburse them or face backlash from the consumer.

The idea you deserve a return on your savings just for having them is childish.

You get a return if the bank takes a risk with your money and lends it out, but then you are taking on the risk that the loan will fail and you will lose some of your savings.

 

I imagine most of you will go apoplectic at this though...

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21 minutes ago, Locke said:

 

Why?

Imagine we only had physical gold and silver bullion as money. If you were to store someone's cash at your house (i.e. act as their bank), you would charge them to cover the cost of installing a safe, hiring security and for the increased risk of being robbed.

Electronic banks still have to cover the cost of compliance with regulatory burden, the cost of access to the worldwide banking system, insurance against fraud or computer failure and the loss incurred when grannies hand their cash over to fraudsters and the bank has to reimburse them or face backlash from the consumer.

The idea you deserve a return on your savings just for having them is childish.

You get a return if the bank takes a risk with your money and lends it out, but then you are taking on the risk that the loan will fail and you will lose some of your savings.

 

I imagine most of you will go apoplectic at this though...

The whole point is that the bank you deposit with has the benefit and use of your money. They make money off of your deposits and pay interest for that right.

If they are going to start charging for the right to given them your money, then people will just opt out and keep it in cash outside the system.

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2 hours ago, Locke said:

The idea you deserve a return on your savings just for having them is childish.

Well that's about the only phase of my life when that sort of action happened, so, yeah...

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2 hours ago, Errol said:

The whole point is that the bank you deposit with has the benefit and use of your money. They make money off of your deposits and pay interest for that right.

If they are going to start charging for the right to given them your money, then people will just opt out and keep it in cash outside the system.

Quite but they will have the costs of installing the safe buying a big dog feeding it installing CCTV and the worry of being broken into.

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3 hours ago, Errol said:

The whole point is that the bank you deposit with has the benefit and use of your money. They make money off of your deposits and pay interest for that right.

 

3 hours ago, Locke said:

Imagine we only had physical gold and silver bullion as money. If you were to store someone's cash at your house (i.e. act as their bank), you would charge them to cover the cost of installing a safe, hiring security and for the increased risk of being robbed.

Electronic banks still have to cover the cost of compliance with regulatory burden, the cost of access to the worldwide banking system, insurance against fraud or computer failure and the loss incurred when grannies hand their cash over to fraudsters and the bank has to reimburse them or face backlash from the consumer.

Also on top, if you deposit money in a bank it isn't just kept in a vault safely for your protection but lent out and if those lending decisions go wrong the immediate risk is to the depositors, so interest is a also payment for that risk . 

Not too an apoplectic  comment I hope!

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3 hours ago, Boo Hoo May said:

Isn't the things you state just one of the costs of doing business?

Which can exceed the return.

3 hours ago, Errol said:

The whole point is that the bank you deposit with has the benefit and use of your money. They make money off of your deposits and pay interest for that right.

If they are going to start charging for the right to given them your money, then people will just opt out and keep it in cash outside the system.

A bank could conceivably not lend money and simply offer secure storage as a chargeable  service, which is effectively negative interest.

4 minutes ago, nightowl said:

 

Also on top, if you deposit money in a bank it isn't just kept in a vault safely for your protection but lent out and if those lending decisions go wrong the immediate risk is to the depositors, so interest is a also payment for that risk . 

Not too an apoplectic  comment I hope!

Well yeah, If they lend out at 10%, you're only going to get like 5% and the difference covers insurance, running costs and profit.

The old risk vs. reward comes in. If you take no risk (your cash is fully secured) you get no reward and in fact have to pay for the service. 

If you want more interest, you have to accept a higher risk that you lose your investment.

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6 hours ago, Locke said:

Imagine we only had physical gold and silver bullion as money. If you were to store someone's cash at your house (i.e. act as their bank), you would charge them to cover the cost of installing a safe, hiring security and for the increased risk of being robbed.

 

Call me naive, but if friend A asked me to store their gold, I'd simply lend it to friend B, charge friend B a fee for that, and give friend A a small cut of that fee, keeping the fat of it for myself. 

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52 minutes ago, Orb said:

Call me naive, but if friend A asked me to store their gold, I'd simply lend it to friend B, charge friend B a fee for that, and give friend A a small cut of that fee, keeping the fat of it for myself. 

Why, when you could charge both of them??

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  • 311 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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