A Consequence of Negative Interest Rate Is Home Borrowers Collect Interest

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Charles Duxbury and David Gauthier-Villars, Home Borrowers Collect Interest. Wall Street Journal, Apr 15, 2016.
http://www.wsj.com/articles/the- ... st-rates-1460643111

Quote:

(a) "Hans Peter Christensen got some unusual news when he opened his most recent mortgage statement. His quarterly interest payment was negative 249 Danish kroner [Denmark has not joined eurozone].

"Instead of paying interest on the loan he got a decade ago to buy a house in this northern Denmark city, his bank paid him the equivalent of $38 in interest for the quarter. As of Dec 31, his mortgage rate, excluding fees, stood at negative 0.0562%.

"It has been nearly four years since Denmark entered the world of negative monetary policy * * *

"Scandinavia’s experience has given economists a chance to study what happens when rates drop below zero—long considered an inviolable floor on rates.

(b) "Denmark, where the central bank's benchmark rate stands at minus 0.65%, has lived in negative territory longer than any other country.

(c) "Sweden's Riksbank, the world's oldest central bank [established 1668], first went negative in February of last year [14 months ago] in an effort to import inflation.

(d) "Mr Christensen, the financial consultant, bought his home outside Aalborg for 1.7 million Danish kroner ($261,000) in 2005 * * * His interest rate first dipped below zero last summer. Because of various mortgage fees, he still pays a modest amount each quarter in addition to his principal payment.

"It isn't known how many Danes have negative rates because lenders often don't disclose such numbers. Realkredit Danmark, one of the nation's largest mortgage lenders, said it provided 758 borrowers with negative interest rates last year.

"The flip side of the picture is that banks no longer pay interest on most saving accounts. Mr Christensen said Danes are turning to property investments as an alternative.

Note: Swedish National Bank
https://en.wikipedia.org/wiki/Swedish_National_Bank
(Swedish: Sveriges Riksbank, or simply Riksbanken)

when the bank was created in 1668, it was called Riksens Ständers Bank ("Bank of the Estates of the Realm").