With negative rates, homeowners in Europe are paid to borrow


LISBON – Paula Cristina Santos has a dream mortgage: the bank pays her.

Its interest rate fluctuates, but right now it’s around minus 0.25%. Thus, each month, Ms. Santos’ lender, Banco BPI SA, deposits interest in her account on the mortgage of 320,000 euros, equivalent to approximately 380,000 dollars, which she contracted in 2008. In March, she paid collected about 45 dollars. She still pays the principal of the loan.

Ms Santos’ upside down relationship with her lender began years ago when the European Central Bank cut interest rates below zero to revive the continent’s fragile economy amid a crisis in the sovereign debt. Negative rates have helped everyone get cheap financing from governments to small businesses. This has prompted households to borrow and spend. And he broke the basic rule of credit, allowing banks to owe borrowers money.

Ms. Santos’ case was supposed to be rare and almost over now. After the ECB cut interest rates below zero in 2014, eurozone economies improved and expectations were that rates would rise in a few years. But the coronavirus pandemic has changed all that.

As the economic suffering in Europe drags on, negative rates remain – and they are falling. As a result, more borrowers in Portugal as well as in Denmark, where interest rates turned negative in 2012, find themselves in the unusual situation of receiving interest on their loans.


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