Negative Mortgage Rates...

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Submitted by flu on August 19, 2019 - 6:06am

Lol..
https://finance.yahoo.com/news/negative-...

Maybe I will cash out refinance everything if that happens here... Kick the can down the road...lol

This time, it sure looks different....lol

it seems like governments are doing just about anything to prevent a slowdown.

Submitted by The-Shoveler on August 19, 2019 - 7:47am.

It is a little weird, the desire to avoid a recession seems stronger than it has ever been.

My theory is there is just too much money sitting on the sidelines.

Submitted by spdrun on August 19, 2019 - 8:33am.

They're not negative with fees and they have a 10-year repayment period (apparently, they're fully amortized). Effective interest over 10 years is about 11%, so the real rate is still positive at ~1% p/a. You'd be paying 923 per month per 100,000 borrowed if you took this loan.

(277000 / 250000) = 1.108

(100000 * 1.108) / 120 = 923.

They also have a 20% equity requirement ... no 3%-down nonsense like the US is doing right now. Think of it more as a HELOC with a 10-yr teaser rate. The monthly payments are basically hard-money territory.

Denmark is an unusual case. The Danish Crown is pegged to the Euro, but they have a bond bubble going -- investors are buying Danish bonds as a proxy for their currency in the hope that the Euro peg will be removed and the currency will rise dramatically.

Here's a better explanation ... it's actually far more restrictive than most US loans:

https://www.livemint.com/industry/bankin...

Danish banks are also offering loans with 0% per annum for 20 years. Let's assume that fees are the same, so we end up with about 1.5% p/a or 35% over 20 years. Repayment of a 100,000 loan is 135,000. Dividing by 240 months gets you 562/mo, which isn't that cheap by US 30-year standards.

Submitted by FlyerInHi on August 19, 2019 - 8:59am.

The-Shoveler wrote:

My theory is there is just too much money sitting on the sidelines.

If that's the case, why would givernments and central banks need to add liquidity?

Submitted by The-Shoveler on August 19, 2019 - 9:43am.

Because people like flu are taking their money out of the bank and paying off their loans LOL Just kidding.

Well when you have negative rates I think it is quite obvious, the gov's want you to take you money and put it to work, not let it sit in the bank.

Submitted by FlyerInHi on August 19, 2019 - 9:52am.

But that’s not too much money on the sidelines. It’s not enough demand for products and services. Business are not borrowing and investing because they don’t forecast demand.

And remember from first year economics class, ability to pay is a component of demand. No ability to pay (no cash) = no demand.

Submitted by The-Shoveler on August 19, 2019 - 10:30am.

LOL IMO part of that is correct, investors are not finding good ways to put money to work, That is why people like flu are paying off loans LOL.

Except maybe home builders along the I-15 between Fallbrook and Corona LOL.

Submitted by carlsbadworker on August 19, 2019 - 12:00pm.

FlyerInHi wrote:
But that’s not too much money on the sidelines. It’s not enough demand for products and services. Business are not borrowing and investing because they don’t forecast demand.

And remember from first year economics class, ability to pay is a component of demand. No ability to pay (no cash) = no demand.

To be fair, no demand of money != no demand for product/service.

Remember, Whatsapp took only $8 million Series A funding to get to 200 million active users and 50 staff members.

If the world is now run by software, the demand of capital is in decline, the demand for talent is on the rise (see salaries in Bay Area). This is really a Silicon Valley v.s. NYC story.

Submitted by FlyerInHi on August 19, 2019 - 12:30pm.

I kinda agree Carlsbad worker. ..

I like to watch Kai Fu Lee talk about AI. He's saying don't believe that new jobs will be created because of, or thanks to, automation. Therefore, we need to find ways to put money into the pockets of ordinary people to drive demand.

Kai Fu Lee is cool because he's cool as a cucumber. I aim to be that way. Be cool, think rationally.

Submitted by flu on August 19, 2019 - 7:54pm.

The-Shoveler wrote:
Because people like flu are taking their money out of the bank and paying off their loans LOL Just kidding.

Well when you have negative rates I think it is quite obvious, the gov's want you to take you money and put it to work, not let it sit in the bank.

I predict the amount I took out to pay off my mortgage is gonna go right back in there from income from my new job and rent and investments and I doubt I will notice it. 6 months tops..Perfect combination of continued decent employment with good pay + decent returns from investments + decent income from rentals. It's like a stuck feedback loop, except unlike normal feedback loops, this one is actually good. lol

Submitted by scaredyclassic on August 20, 2019 - 7:14pm.

Ok, but why about the rest of Europe. I looks like rates are in the 2 perc. Range.

I'd like that.

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