{"id":15357,"date":"2015-12-17T08:25:30","date_gmt":"2015-12-17T13:25:30","guid":{"rendered":"http:\/\/olduvai.ca\/?p=15357"},"modified":"2015-12-17T08:25:47","modified_gmt":"2015-12-17T13:25:47","slug":"perverse-unpredictable-effects-of-negative-interest-rates-mortgage-rates-soar-in-switzerland","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=15357","title":{"rendered":"\u201cPerverse, Unpredictable Effects\u201d of Negative Interest Rates: Mortgage Rates Soar in Switzerland"},"content":{"rendered":"<header>\n<h3 class=\"entry-title\"><a href=\"http:\/\/wolfstreet.com\/2015\/12\/16\/perverse-unpredictable-effects-of-negative-interest-rates-mortgage-rates-soar-in-switzerland\/\" target=\"_blank\">\u201cPerverse, Unpredictable Effects\u201d of Negative Interest Rates: Mortgage Rates Soar in Switzerland<\/a><\/h3>\n<\/header>\n<div class=\"entry-content\">\n<div class=\"ssba ssba-wrap\"><strong>The unintended consequences of NIRP.<\/strong><\/div>\n<p>Negative interest rates \u2013 called \u201c<a href=\"http:\/\/wolfstreet.com\/2014\/11\/20\/the-wrath-of-draghi-bailed-out-german-megabank-imposes-negative-interest-rates\/\"><u>punishment interest<\/u><\/a>\u201d in Germany \u2013 have morphed from sheer\u00a0impossibility to solid reality in Europe. Having seen how\u00a0they work,\u00a0the Bank of Canada\u00a0<a href=\"http:\/\/wolfstreet.com\/2015\/12\/12\/bank-of-canada-crushes-loonie-dollar-creates-mother-of-all-shorts\/\"><u>has invoked them<\/u><\/a>\u00a0now, and Fed Chair Janet Yellen, has put them \u201con the table\u201d before a House of Representatives committee.<\/p>\n<p>In Europe, after they became established as the latest method of flogging savers until their mood improves, all kinds of absurdities saw the light of the day. For example, bailed-out national governments can now fund their deficits at negative rates, extracting money from their bondholders, rather than paying them. Perhaps the coolest notion was that banks would be \u201c<a href=\"http:\/\/money.cnn.com\/2015\/04\/22\/investing\/negative-mortgage-rates-europe\/\"><u>paying your mortgage<\/u><\/a>.\u201d<\/p>\n<p>That may have been an illusion \u2013 at least in Switzerland, where the Swiss National Bank slashed its benchmark rate on \u201csight deposits\u201d to negative 0.75% on January 15, the day of the epic \u201cFrankenschock.\u201d That day, the SNB abandoned its cap on the franc, which within the blink of an eye, soared nearly 40% against the euro and the dollar, wiping out currency speculators in the process and shaking up global currency markets.<\/p>\n<p>The negative benchmark rate had the effect that by now, 70% of franc-denominated corporate bonds trade with negative yields, according to Credit Suisse. And the theory was that mortgages would certainly head that way.<\/p>\n<p>Initially, interest rates on 10-year fixed-rate mortgages plunged to about 1%, with some quoted below 1%, and folks were already speculating about 0% mortgages or negative-rate mortgages. But then something funny happened on the way to the bank: unintended consequences kicked in.<\/p>\n<p>Swiss banks somehow decided, for whatever inexplicable reason, to make a living. That\u2019s hard to do for banks when they lend out money in a negative interest-rate environment. So the biggest Swiss banks accomplished a unique feat: they\u2019ve jacked up mortgage rates since then, with the 10-year fixed-rate now at about 2% and the 15-year fixed-rate at about 2.5%.<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>\u201cPerverse, Unpredictable Effects\u201d of Negative Interest Rates: Mortgage Rates Soar in Switzerland The unintended consequences of NIRP. Negative interest rates \u2013 called \u201cpunishment interest\u201d in Germany \u2013 have morphed from sheer\u00a0impossibility to solid reality in Europe. Having seen how\u00a0they work,\u00a0the Bank of Canada\u00a0has invoked them\u00a0now, and Fed Chair Janet Yellen, has put them \u201con the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[4869,558,1389,775,4254,4255],"class_list":["post-15357","post","type-post","status-publish","format-standard","hentry","category-economics","tag-mortgage-rates","tag-negative-interest-rates","tag-nirp","tag-switzerland","tag-wolf-richter","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15357","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15357"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15357\/revisions"}],"predecessor-version":[{"id":15359,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15357\/revisions\/15359"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15357"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15357"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15357"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}