Back in 2016, when the first negative interest rate bonds first emerged, we offered readersa glimpse of the NIRP future:
After an intense pow-wow between the administration, Congressional leaders and the Federal Reserve, the Negative Mortgage Rate Program (NMRP) is born. The program is simple. Homeowners will be paid to borrow. The Federal Reserve declares that the NMRP is a brilliant extension of NIRP (negative interest rate policy), because it will benefit everyone, not just the 1%ers.
Here’s how it works: No downpayment needed. 100% financing.
No payments needed. This is the reverse of the negative amortization loans during the subprime era. In other words, it is a negative negative amortization, or neg-neg-am loan. The loan balance will decrease instead of increase.
No need for mortgage insurance since, with no payments, there can be no defaults.
No qualifying needed, hence removing the entire cumbersome loan application process.
Your interest cost will be -$1,000 per year. In other words, your loan balance will be $99,000, if you make no payments at all. Using a commonly accepted 30 year term, the loan balance at the end of 30 years would be around $50,000, all without the borrower having to pay a dime in mortgage expense.
Well for Denmark, the future is now, because three years later and with over $15 trillion in negative-yielding debt around the world, Denmark’s third largest bank is now offering borrowers mortgages at a negative interest rate, effectively paying its customers to borrow money for a house purchase.
Jyske Bank said this week that customers would now be able to take out a 10-year fixed-rate mortgage with an interest rate of -0.5%, meaning customers will pay back less than the amount they borrowed, or precisely what we said would happen in our 2016 preview of the dystopian future.