With Negative Rates, Homeowners In Europe Are Paid To Borrow
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    HOUSE MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $1,656,430 (+0.65%)       Melbourne $994,677 (+0.27%)       Brisbane $978,777 (+0.15%)       Adelaide $878,311 (-0.89%)       Perth $857,374 (-0.27%)       Hobart $742,122 (-0.64%)       Darwin $666,990 (-0.54%)       Canberra $987,062 (-0.84%)       National $1,052,287 (+0.12%)                UNIT MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $750,216 (+0.60%)       Melbourne $492,069 (-0.93%)       Brisbane $539,184 (+0.19%)       Adelaide $444,416 (-2.21%)       Perth $457,888 (+0.17%)       Hobart $527,154 (-0.12%)       Darwin $344,216 (+0.22%)       Canberra $504,424 (-0.33%)       National $530,515 (-0.07%)                HOUSES FOR SALE AND WEEKLY CHANGE     Sydney 10,120 (-121)       Melbourne 15,095 (-40)       Brisbane 7,990 (0)       Adelaide 2,438 (+11)       Perth 6,327 (-40)       Hobart 1,294 (-21)       Darwin 238 (+1)       Canberra 1,020 (+13)       National 44,522 (-197)                UNITS FOR SALE AND WEEKLY CHANGE     Sydney 8,780 (+4)       Melbourne 8,222 (-18)       Brisbane 1,619 (+1)       Adelaide 396 (-4)       Perth 1,599 (+9)       Hobart 213 (+10)       Darwin 400 (-6)       Canberra 1,003 (-24)       National 22,232 (-28)                HOUSE MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $820 (+$20)       Melbourne $610 (+$10)       Brisbane $640 (+$3)       Adelaide $610 (+$10)       Perth $670 ($0)       Hobart $550 ($0)       Darwin $700 ($0)       Canberra $680 (-$10)       National $669 (+$5)                UNIT MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $775 (+$15)       Melbourne $550 ($0)       Brisbane $630 (-$20)       Adelaide $500 (+$5)       Perth $628 (+$8)       Hobart $450 ($0)       Darwin $500 (-$15)       Canberra $570 ($0)       National $591 (+$)                HOUSES FOR RENT AND WEEKLY CHANGE     Sydney 5,426 (-22)       Melbourne 5,783 (+92)       Brisbane 4,042 (+149)       Adelaide 1,399 (+12)       Perth 2,345 (+25)       Hobart 383 (-2)       Darwin 94 (-10)       Canberra 595 (-9)       National 20,067 (+235)                UNITS FOR RENT AND WEEKLY CHANGE     Sydney 8,835 (+301)       Melbourne 4,537 (+107)       Brisbane 2,209 (+57)       Adelaide 391 (-8)       Perth 741 (-7)       Hobart 137 (+5)       Darwin 152 (-14)       Canberra 612 (+17)       National 17,614 (+458)                HOUSE ANNUAL GROSS YIELDS AND TREND       Sydney 2.57% (↑)      Melbourne 3.19% (↑)      Brisbane 3.40% (↑)      Adelaide 3.61% (↑)      Perth 4.06% (↑)      Hobart 3.85% (↑)      Darwin 5.46% (↑)        Canberra 3.58% (↓)     National 3.30% (↑)             UNIT ANNUAL GROSS YIELDS AND TREND       Sydney 5.37% (↑)      Melbourne 5.81% (↑)        Brisbane 6.08% (↓)     Adelaide 5.85% (↑)      Perth 7.13% (↑)      Hobart 4.44% (↑)        Darwin 7.55% (↓)     Canberra 5.88% (↑)      National 5.80% (↑)             HOUSE RENTAL VACANCY RATES AND TREND       Sydney 0.8% (↑)      Melbourne 0.7% (↑)      Brisbane 0.7% (↑)      Adelaide 0.4% (↑)      Perth 0.4% (↑)      Hobart 0.9% (↑)      Darwin 0.8% (↑)      Canberra 1.0% (↑)      National 0.7% (↑)             UNIT RENTAL VACANCY RATES AND TREND       Sydney 0.9% (↑)      Melbourne 1.1% (↑)      Brisbane 1.0% (↑)      Adelaide 0.5% (↑)      Perth 0.5% (↑)      Hobart 1.4% (↑)      Darwin 1.7% (↑)      Canberra 1.4% (↑)      National 1.1% (↑)             AVERAGE DAYS TO SELL HOUSES AND TREND         Sydney 30.3 (↓)       Melbourne 31.5 (↓)       Brisbane 31.7 (↓)       Adelaide 25.7 (↓)       Perth 35.4 (↓)     Hobart 33.7 (↑)      Darwin 36.2 (↑)        Canberra 32.0 (↓)     National 32.1 (↑)             AVERAGE DAYS TO SELL UNITS AND TREND         Sydney 31.3 (↓)       Melbourne 31.9 (↓)       Brisbane 32.1 (↓)       Adelaide 24.8 (↓)       Perth 38.7 (↓)       Hobart 37.6 (↓)     Darwin 46.5 (↑)        Canberra 39.2 (↓)     National 35.3 (↑)            
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With Negative Rates, Homeowners In Europe Are Paid To Borrow

Covid-19 is widening the pool of mortgage holders who receive interest.

By Patricia Kowsmann
Fri, Mar 26, 2021 11:12amGrey Clock 3 min

ISBON—Paula Cristina Santos has a dream mortgage: The bank pays her.

Her interest rate fluctuates, but right now it is around minus 0.25%. So every month, Ms. Santos’s lender, Banco BPI SA, deposits in her account interest on the 320,000-euro mortgage, equivalent to roughly $380,000, she took out in 2008. In March, she received around $45. She is still paying principal on the loan.

Ms. Santos’s upside-down relationship with her lender started years ago when the European Central Bank cut interest rates to below zero to reignite the continent’s frail economy in the midst of a sovereign-debt crisis. The negative rates helped everyone get cheap financing, from governments to small companies. It gave an incentive to households to borrow and spend. And it broke the basic rule of credit, allowing banks to owe money to borrowers.

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

As economic pain in Europe drags on, the negative rates remain—and they are getting lower. As a result, more borrowers in Portugal as well as in Denmark, where interest rates turned negative in 2012, are finding themselves in the unusual position of receiving interest on their loans.

“When I took the mortgage, I never imagined this scenario, and neither did the bank,” said Ms. Santos, a 44-year-old business consultant.

Deco, a Lisbon-based consumer-rights group that in 2019 estimated that rates had turned negative on more than 30,000 mortgage contracts in Portugal, said the figure has likely more than doubled since then.

Many European borrowers have variable-rate mortgages tied to interest-rate benchmarks. Like most in Portugal, Ms. Santos’s is tied to Euribor, which is based on how much it costs European banks to borrow from each other. She pays a fixed 0.29% on top of the three-month Euribor rate. When she took out the mortgage in 2008, three-month Euribor was close to 5%. It has been falling in recent months and is now near a record low, at minus 0.54%.

Portugal’s state-owned Caixa Geral de Depósitos SA said about 12% of its mortgage contracts currently carry negative rates. The number of such contracts rose by 50% last year, according to a person familiar with the situation. Ms. Santos’s bank, BPI, said it has so far paid €1 million in interest on mortgage contracts to an undisclosed number of customers.

Spain, where most mortgages are also linked to Euribor, faced a similar situation. But the country passed a law that prevents rates from going below zero. Portugal did the opposite, passing a bill in 2018 that requires banks to reflect negative rates.

“In the event that the decline in interest rates exceeds the mortgage spread, the client would not pay interest, but in no case [would the bank] pay in favour of the borrower,” said a spokesman for Banco Bilbao Vizcaya Argentaria SA, one of Spain’s largest lenders.

There are no official figures available on how many mortgages are currently carrying a zero interest rate in Spain. Banks have declined to disclose their numbers.

In Denmark, more borrowers have seen their rates turn negative, although in most cases they are still paying their banks because of an administration fee charge.

There, mortgages aren’t directly financed by the banks, which don’t set their terms. Instead, they serve as a type of intermediary, selling bonds to investors at a specific rate, lending the same amount to the borrower for the same rate.

Nykredit, Denmark’s biggest mortgage lender, said more than 50% of its loans with an interest period of up to 10 years have a negative interest rate before the fee. That proportion is rising because mortgages tend to have their rates adjusted every few years.

That is the case for Claus Johansen, 41, who works in Nykredit’s mortgage department. In 2016, he took on a five-year adjustable-rate mortgage for 1.2 million Danish kroner, equivalent to roughly $190,000, to buy a house north of Copenhagen. His interest repayments for the first five years were set at 0.06%. In January of this year, the rate was revised to minus 0.26%, which is subtracted from a 0.6% administration fee he has to pay the bank.

“It’s odd, but negative rates have been around for so many years, we just got used to it,” Mr. Johansen said.

A flip side to borrowers receiving interest from their lenders is that banks in Denmark and elsewhere have started charging customers for their deposits, saying they can no longer absorb the negative rates their central bank charges them. Mr. Johansen said he keeps his account balance under the threshold at which his bank would start charging him.

In Lisbon, Ms. Santos said that while it is great to receive interest from her bank, her situation overall isn’t better off because BPI has sharply cut the interest it offered on her business deposit account in recent years, to close to zero, from around 3%. Her plans to buy a new house are on hold because BPI is now charging a much higher spread on new mortgages, to avoid falling into the negative-rates trap again.

“We wanted to move out of the city centre, but it is hard to leave such a good mortgage deal behind,” Ms. Santos said.



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Global economic growth is becoming more broad based, with surveys indicating that business activity in both the U.S. and the eurozone gained momentum in May.

The eurozone economy contracted in the second half of 2023 following a surge in energy and food prices triggered by Russia’s invasion of Ukraine, and the subsequent rise in interest rates intended to tame that inflation.

By contrast, the U.S. economy expanded strongly over the same period, opening up an unusually wide growth gap with the eurozone. That gap narrowed as the eurozone returned to growth in the first three months of the year, while the U.S. slowed.

However, surveys released Thursday point to a fresh acceleration in the U.S., even as growth in the eurozone strengthened. That bodes well for a global economy that relied heavily on the U.S. for its dynamism in 2023.

The S&P Global Flash U.S. Composite PMI —which gauges activity in the manufacturing and services sectors—rose to 54.4 in May from 51.3 in April, marking a 25-month high and the first time since the beginning of the year that the index hasn’t slowed. A level over 50 indicates expansion in private-sector activity.

“The data put the U.S. economy back on course for another solid gross domestic product gain in the second quarter,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Eurozone business activity in turn increased for the third straight month in May, and at the fastest pace in a year, the surveys suggest. The currency area’s joint composite PMI rose to 52.3 from 51.7.

The uptick was led by powerhouse economy Germany, where continued strength in services and improvement in industry drove activity to its highest level in a year. That helped the manufacturing sector in the bloc as a whole grow closer to recovery, reaching a 15-month peak.

By contrast, surveys of purchasing managers pointed to a slowdown in the U.K. economy following a stronger-than-expected start to the year that saw it outpace the U.S. The survey was released a day after Prime Minister Rishi Sunak called a surprise election for early July, banking on signs of an improved economic outlook to turn around a large deficit in the opinion polls.

Similar surveys pointed to a further acceleration in India’s rapidly-expanding economy, and to a rebound in Japan, where the economy contracted in the first three months of the year. In Australia, the surveys pointed to a slight slowdown in growth during May.

Businesses reported that they were raising their prices at the slowest pace since November, which should reassure the European Central Bank. However, the eurozone continued to add jobs in May, suggesting that wages might not cool as rapidly as the ECB had hoped.

The ECB released figures Thursday that showed wages negotiated by labor unions in the eurozone were 4.7% higher in the first quarter than a year earlier, a faster increase than the 4.5% recorded in the final three months of 2023

The ECB has signalled it will lower its key interest rate in early June, while the Fed is waiting for evidence that a slowdown in inflation will resume after setbacks this year.

Nevertheless, eurozone businesses and households shouldn’t bank on successive cuts to borrowing costs, ECB Vice President Luis de Guindos said. “There is a huge degree of uncertainty,” he said. “We have made no decisions on the number of interest rate cuts or on their size,” he said in an interview published Thursday. “We will see how economic data evolve.”

Continued resilience in the eurozone economy would likely make the ECB more cautious about lowering borrowing costs after its first move, economist Franziska Palmas at Capital Economics wrote in a note. “If the economy continues to hold up well, cuts further ahead may be slower than we had anticipated,” she said.

– Edward Frankl contributed to this story.

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This stylish family home combines a classic palette and finishes with a flexible floorplan

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