ERROL PARKER | Editor-at-large | Contact
One of our town’s smallest lenders has become the first financial institution in Australia to issue a negative interest rate today after a mortgagor said he was going to ‘quit his job and go travelling for a bit.’
The Bank of Mum & Dad (BOMD), which lends at a rate dictated by the Reserve Bank of Mum & Dad in Sydney, is set to start paying their only customer to lend money from them each month.
Issuing a negative interest rate on a loan is highly-irregular and it only put in place to stimulate the economy as a last-ditch effort.
Which makes today’s announcement by the BOMD all the more odd as interest rates set by the Reserve Bank of Australia still having a bit of breathing room before they hit the floor.
Speaking to The Advocate this morning, the bank’s co-founder and co-director, Lachlan Bellmore, said he decided to issue a negative interest rate to his son and sole client after he experienced ‘professional burnout’ and needed a break.
“We understand that by offering a negative interest rate on our mortgage we have with our son, we’re going to have to pay him thousands of dollars to take money off our hands,” he said.
“But he’s been doing it tough. He’s been working 8-hour days under the guidance of his uncle at Minthurst Poonz and that’s after he went to university for five years to get his LLB. It’s hard,” he said.
“He came to me in tears and said he needed to go to Europe before he had a mental breakdown. I could see the desperation in his face, I couldn’t say no. So we’re giving him a -4% interest rate on the $1.34m principal and deposit we leant him.”
Our reporter reached out to
More to come.