ICYMI: Denmark's Jyske Bank has launched the first negative interest rate mortgage in the world — offering borrowers a 10-year deal at -0.5%:
. The bank will offer borrowers a 10-year deal at -0.5% — meaning borrowers will still make monthly payments, but the amount outstanding will be reduced each month by more than the borrower has paid.The offering is enabled by the fact that Jyske Bank can go into money markets and borrow from institutional investors at a negative rate and is in turn passing this deal along to customers, Jyske's housing economist Mikkel Høegh said.
Many major central banks have lowered interest rates in the last few years, hoping to stoke growth and stave off a downturn. Central banks in New Zealand, India, and Thailand are among recent banks to announce cuts to interest rates, doing so in early August,The cuts are meant to boost money supply in the economy as well as demand. This can also make it cheaper for banks in a country to borrow from that country's central bank.
To offset expenses, Jyske Bank should consider adopting a digital-first mortgage lending process, which could cut labor costs: While customer interactions with a teller or call agent incur a variable cost of $4 for a bank, mobile interactions only cost around 10 cents,Further, an automated underwriting process could potentially reduce fraud incidences.
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