Interest rates on Danish home loans have dropped to a new all-time low, Nordea Kredit said in a press release on Monday.
The bank said that its ‘Kort Rente' loan has dropped to -0.31 percent interest, the lowest it has ever been.
“Interest rates have once again been set at such a low level that traditional economics textbooks fall short," Nordea economist Lise Nytoft Bergman said.
Despite the willingness of investors to pay Danish homebuyers to borrow money, the record low rates do not mean that borrowers will score a profit.
Nordea Kredit said that a loan of one million kroner would result in an income of 258 kroner per month, while the bank requires an 875 kroner monthly fee. After taxes, the loan fees would cost 409 kroner per month.
The previous record for low interest rates was -0.21 percent, Nordea said. The new -0.31 percent rate will be in effect for the remainder of the year.
Danish interest rates are determined by the supply and demand of the bond market. According to the Association of Danish Mortgage Banks (Realkreditrådet), “this is unique by international standards and doesn't form part of the mortgage system of any other country in the world.”
The Association of Danish Mortgage Banks has a short film that explains Denmark's mortgage system that can be viewed here.