I had heard before that Japan's (national bank) interest rate is negative, now I read that Switzerland's rate is -0.75%
Honest question: as Australians, is it possible for us to somehow borrow from a Swiss bank where they are apparently paying you interest on the amount you borrow?
What would the risks be? Is this question is totally naive?
Thanks,
Oh really? It works one way but not the other? Typical banks, I suppose :D
Makes total sense I guess given all those people using shady numbered Swiss bank accounts
That blows my mind….an economy that will actually punish you for saving.
It doesn't apply to consumers
Australia economy tax you for the interest you earn through saving.
These rates are for institutions not consumers.
Zero rates are designed to get lending institutions to borrow money from central banks and lend it out to spur economic activity. Some lenders borrow and invest the money in stocks etc instead.
Negative rates are designed to punish banks that keep their funds with central banks as central banks want the money out into the economy
Yes, this is correct. Mortgage rates are more closely tied to the bond market, so logically will never be zero nor negative. Then again, in this strange economy, you never know.
Negative interest rates are intended to be a disincentive for fx speculators to hold the currency. In years gone by double digit negative interest rates have been put in place by CB's, particularly Switzerland.
You have to take into account expected changes in fx rates. It's called interest rate parity: the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate.
Back in the 80's many people borrowed OS for property, then went bankrupt, when the exchange rate tanked, and also because so many had to sell, the property market got even worse.
The rate is for financial institutions not for the consumers.
The interest rate is at the moment is 0.1 to 0.5 for term deposits
homeloan rate is 2.0 to 2.4% depends on banks.
Carry trade https://www.investopedia.com/terms/c/currencycarrytrade.asp
You can go right now to an Australian FX broker like Pepperstone and sell a whole bunch of CHF for AUD on leverage AND get paid EVERYDAY the interest rate for selling CHF AND the interest rate for holding AUD.
But margin will probably give you a call.
What does the fx trade cost? And you would have to do it at least twice to get back to AUD. If it's 3% each time, wouldn't you need a minimum 6% spread?
Yep, I don't think negative interest rate means that you can get paid to borrow money. It just means that you have to pay to park your money in a bank. Which means most people would rather either invest in another country, put their money under their pillow.