March 26, 2019 / 1:19 PM / 4 months ago

Danish mortgage lenders get ready for record-low interest rates

COPENHAGEN, March 26 (Reuters) - Two Danish mortgage lenders are prepared to issue 30-year mortgages at a fixed rate of 1 percent, the lowest ever in Denmark and one of the lowest in the world.

Nykredit, Denmark’s largest mortgage lender, and Nordea Kredit, part of Helsinki-based Nordea Bank, both said on Tuesday they had made the necessary preparations to be ready to issue the 1 percent loan within a few days.

Neighbouring Germany’s 10-year government bond yield — which moves inversely to its price — remained below zero percent, near its 2 1/2-year low, on Tuesday as the threat of a global economic slowdown dictated investment strategies and investors struggled to make sense of Brexit.

In Denmark, a triple-A rated nation often used as a safe haven by investors in uncertain times, homeowners fund their loans through a very large mortgage market whose covered bonds have not defaulted once in more than 230 years.

Nykredit and Nordea Kredit said they would only issue their ultra-low-rate mortgages if bond yields go even lower, preventing them from issuing new loans in the 1.5 percent series they currently offer their customers.

“We’re on the cusp of April where hundreds of thousands of homeowners have the deadline for refinancing their loans,” chief analyst at Nykredit’s Totalkredit Jeppe Borre said in a note.

“We do not want to be in a situation where we can’t offer a fixed-rate loan at the best interest rate to our customers if the price of the 1.5 percent bonds rises above 100,” Borre said.

Reporting by Teis Jensen, editing by Larry King

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