Ready for Negative Interest Rates?

Imagine a bank that pays negative interest. Depositors are actually charged to keep their money in an account. Crazy as it sounds, several of Europe’s central banks have cut key interest rates below zero and kept them there for more than a year. Now Japan is trying it, too. For some, it’s a bid to reinvigorate an economy with other options exhausted. - Jana Randow & Simon Kennedy, Bloomberg.com

The Fed is now advising U.S. Banks to prepare for the possible scenario of negative interest rates. Although very hypothetical, it is good to be aware of what this means for the consumer. With treasuries and a few global benchmark interest rate indexes at a negative level, this could potentially lead to extremely low, if not negative mortgage interest rates. 

A recent example was a Spanish Bank that sold mortgages pegged to the Swiss Libor Rate (now negative). Essentially the bank owed interest to their customers, which it couldn't pay (GO FIGURE!), instead the bank reduced the principal for some of its customers. 

While the U.S. is a long shot from negative interest rates, lower interest rates around the globe can potentially prevent another global recession and keep our real estate markets strong, which is always good :-)  

Have questions about today's interest rates or how to qualify for a home loan? Contact the Prospect Los Feliz Team

Thomas Bayles, Sales Team Manager | (626)636-5061 | Thomas.Bayles@prospectmtg.com

Micah Raff, Partner | (818)808-8835 | Micah.Raff@prospectmtg.com

Larisa Lutes, Partner | (323)821-6966 | Larisa.Lutes@prospectmtg.com