No one would ever believe that a negative interest rate mortgage could exist. If it did, what would that mean? Since interest is the way that lenders make money, then how could they possibly offer a negative interest rate on a mortgage? In the event there is a negative interest rate, then the lender would in effect be offering a deal in which the borrower at the end of the loan paid back less than what they borrowed.

Jyske Bank, Denmark’s third largest bank, has recently offered the world’s first mortgage with a negative interest rate. The interest rate is a negative 0.5% a year. The mortgage at that rate is offered as a 10-year deal. Another lender, Nordea, also a Danish bank, is offering a 0% interest rate on a 20-year fixed rate deal and a 30-year at 0.5%.

The borrower, according to Jyske Bank, makes repayments much like the usual mortgage deal, but every month the outstanding balance is reduced by more than what the borrower pays. In comparison, the outstanding balance on a mortgage that has a positive level interest rate would only be reduced by the amount the borrower pays each month. Of course, there would a part of the payment that would go toward the outstanding balance, as well as a part that is paid directly to the interest cost due.  

Negative interest rates are not expected to occur in the UK attached to mortgages or remortgages. However, there have been reductions lately on the interest rates lenders are offering. The low interest rate remortgages are due to the climbing competitiveness between lenders due to Brexit drawing near and lending demand declining.