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What 0% Interest Could Mean For The Mortgage Market

zero percent mortgage rate

Mortgage rates for 30-year-fixed loans rose this week to 3.56 percent, which is up from last week. The president, though, wants interest rates to drop to 0 percent or lower. What would that look like?

The news site MarketWatch delved into that scenario. It says a negative-rate environment wouldn’t be great for the U.S. housing market. For starters, it could drive people toward riskier methods of saving, since bank deposit rates would also be negative in such a scenario. Lenders would become stingier with the loans they offer, as it would be costing them money to make loans.

The 0 percent interest rate could also mean higher home prices. MarketWatch looked to Denmark as one example, finding that’s what happened in that Scandinavian country after its Jyske Bank began offering a 10-year fixed-rate mortgage at negative 0.5% last month. Another Denmark lender, Nordea Bank, meanwhile, has offered Danish home buyers a 20-year fixed-rate mortgage that charges no interest.

Click on the image above to learn more about 0 percent mortgages.

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