Living with Negative Rates on Danish Mortgages

[dealmaker]

Living with Negative Rates on Danish Mortgages (Hedge Nordic)
London (HedgeNordic) – Some Danish individuals can now get a mortgage at a negative rate, and this could still be profitable for local Danish banks, which can fund themselves at interest rates that are even lower. The same logic applies to a number of leveraged investors. “Danish bullet mortgages now have a yield curve ranging from minus 65 basis points at one year to plus 10 basis points at ten year maturities, while convertible mortgages – with prepayment risk – might only pay 0.50% to 1% even at the most common thirty year maturity”, says Formuepleje portfolio manager, Rene Rømer. These rates have come down by at least 70 to 80 basis points over the past year. But Formuepleje’s cost of leverage has now also come down well below minus 0.5% from minus 0.40% a year ago.

 

[Maverick2608]

Interest paid on idle cash of more than CHF 100.000 at Interactive Brokers = -2.11%.

For idle cash in DDK you only have to pay 1.25%.

That is at Interactive Brokers where you find some of the best interest rates on idle cash.

It is indeed a crazy world.

 

[Real Money]

This is insane. I was looking into real estate in the EU, found out some shit. They are pumping bubbles in real estate that puts the fed to shame. Maximum tax rate deduction on interest paid? The maximum tax rate was 52%! WTF are they smoking. This is bonkers, negative financing rates AND gargantuan tax deductions? It's nuts. I don't even want to check the valuations anymore. It's like the twilight zone over there.

 

[Nobert]

This is insane. I was looking into real estate in the EU, found out some shit. They are pumping bubbles in real estate that puts the fed to shame. Maximum tax rate deduction on interest paid? The maximum tax rate was 52%! WTF are they smoking. This is bonkers, negative financing rates AND gargantuan tax deductions? It's nuts. I don't even want to check the valuations anymore. It's like the twilight zone over there.

Could you point out the sources / specific regions ?

 

[Real Money]

Sure, here it is. They are starting to walk the deduction down 0.5% per year for the next few years but it is really big at 49%. You can have >1mm in mortgage and deduct half the payment? I'm not sure about all this, but housing has been going up YoY for a while.

 

[RedDuke]

This is insane. I was looking into real estate in the EU, found out some shit. They are pumping bubbles in real estate that puts the fed to shame. Maximum tax rate deduction on interest paid? The maximum tax rate was 52%! WTF are they smoking. This is bonkers, negative financing rates AND gargantuan tax deductions? It's nuts. I don't even want to check the valuations anymore. It's like the twilight zone over there.

This is a play book for things coming to US. Once market crushes FED will do the same, and that will be the last leg of bull market that could easily catapult SPX above 5000, but then..... Mother of all crushes will come. The good thing is I think we have about a decade before that happens.

 

[richDude]

This is a play book for things coming to US. Once market crushes FED will do the same, and that will be the last leg of bull market that could easily catapult SPX above 5000, but then..... Mother of all crushes will come. The good thing is I think we have about a decade before that happens.

it's a possible scenario. the race to the bottom is still on so the US may be forced to go negative even if it's own economy doesn't warrant.

real question is how do we take advantage. I think too many folks buy into the 'sky is falling' and sit cash on the sideline. biggest mistake for the next 10 years or so.. and by the way SP will be way above 5000 when we are done.