Bargain Basements

Image source: goir, YummyBuum - Shutterstock

What's going on?

Nordea is practically giving new homes away: the Nordic bank started offering its Danish customers interest-free 20 year mortgages on Tuesday (tweet this).

What does this mean?

Denmark might be small economically speaking, but it’s a big deal when it comes to interest rates: the country’s rates have been negative since 2012 – longer than anywhere else in the world. That environment has encouraged its banks to slash their mortgage rates to unprecedented levels too, with Jyske Bank launching the world’s first negative rate mortgage two years ago – effectively paying borrowers to take out the loan. And now Nordea has once again decided to offer super-cheap mortgages, while others like Danske Bank – the country’s biggest – signaled they may follow suit.

Denmark’s not the only country whose mortgage rates are plummeting. With major central banks slashing interest rates to boost their pandemic-hit economies, commercial banks worldwide have been doing much the same thing. Just look at the US: the country’s mortgage rate dropped to 16 record lows in 2020, and it’s now just shy of its lowest level since tracking began.

Why should I care?

For you personally: Stay sharp out there.

With coronavirus still wreaking havoc on the world’s economies, central banks aren’t exactly likely to raise interest rates this year. That’s important to know: low rates are good for stocks, spurring on company earnings by lowering borrowing costs. Just be ready for the moment you do catch wind of an interest rate hike: it could have the opposite effect.

Zooming in: Stay safe out there.

Bonds should – at least in theory – be less popular among returns-hungry investors when interest rates are so low. But even though more than a quarter of global bonds are currently offering negative yields, investors are still flocking to them. That might have something to do with just how much value investors put on “safe haven” assets in times like this.

Originally posted as part of the Finimize daily email.

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