Denmark has the longest history of a country with negative central bank rates is offering homeowners 20-year loans at a fixed interest rate of zero. Customers of one of the Danish home-finance unit can, as of Tuesday, get the mortgages, which will carry a lower coupon than benchmark U.S. 10-year Treasuries. At least two other banks have since said they’ll do the same. Denmark stands out in a global context as the country to have lived with negative central bank rates longer than any other. Back in 2012, policymakers drove their main rate below zero to defend the krone’s peg to the euro. Since then, Danish homeowners have enjoyed continuous slides in borrowing costs. The once unthinkable notion of borrowing for two decades without paying interest comes as central bankers across the globe shy away from rate hikes. No major western central bank is likely to raise rates this year, according to Bloomberg’s quarterly review of monetary policy.
As rates have continued to sink, other banks in Denmark — home to the world’s biggest mortgage-backed covered-bond market -are joining in.
Danish lenders first issued 20-year bonds with 0% coupons a few years ago, as investors looking for a safe place to park their money drove down rates. This is the first time since then that such a product has returned to the shelves.