It seems absurd, but that's how it is: in Denmark, at the end of the month, borrowers must settle the agreed installment, but instead of paying interest on the debt, receive a credit from the bank. This happens when, as in and around Copenhagen, the adjustable rate mortgage spread is lower than the indexation rate.
At this time the Danish central bank rate was set at -0,65 percent. In the face of a lower spread, the mortgage can therefore slip to a negative rate. Hence the paradox: the bank is forced to credit the interest accrued on the sum it has lent instead of asking for it in return.
Technically the road to this paradox is also open in Switzerland, where the official reference rate was brought down by the central bank to -0,75 per cent. Could this also happen in Italy and, more generally, in the countries of the euro area? Certainly yes, but only for mortgages that currently contemplate a spread of less than 0,34 percent. This is because the value of the 1-month Euribor – one of the indexation parameters for variable rate mortgages – is currently at -0,34 per cent. So in the event that someone is repaying a mortgage with a 0,3% spread linked to the 1-month Euribor, the sum of the interest should technically be credited.
