Swedens Policy Rate

New announcement from the Central Bank: Key interest rate lowered to 3.25%

The Central Bank has today announced that the key interest rate, also known as the repo rate, is being lowered from 3.5% to 3.25%. This is the latest change in a series of adjustments we have seen since the beginning of 2024. This reduction comes in the wake of a stabilizing inflation environment, where the CPIF (Consumer Price Index with fixed interest rates) has dropped from 4.7% in August 2023 to 1.2% in August 2024.

Effects on mortgage loans

For mortgage borrowers, the recent rate cut brings some relief to their financial burden. Here is an overview of how costs may change for different loan amounts:

• A mortgage of 1 million SEK: With an interest rate of 4.25% (3.25% repo rate + 1% bank markup), the monthly cost is around 3,541 SEK compared to the previous 3,708 SEK at a rate of 4.5%.
• A mortgage of 3 million SEK: With the new rate, the monthly cost is approximately 10,623 SEK compared to the previous 11,123 SEK.
• A mortgage of 5 million SEK: The monthly cost amounts to around 17,705 SEK compared to the previous 18,539 SEK.

It is important to note that these calculations do not include amortization, which is a requirement for many households depending on their debt-to-income ratio.

Personal loans and other interest rates

Personal loans are also affected by the key interest rate, but here we see a higher markup from banks, usually around 2.5%. The new interest rate for personal loans can be expected to be around 5.75% compared to the previous 6.0%.

Future interest rate developments

The latest trend shows a significant decrease in inflation, which may indicate further interest rate cuts in the future if this trend continues. The stable CPIF level gives the Central Bank room to further lower the interest rate to stimulate the economy, if necessary.

Forecast for food prices, fuel prices, and energy prices

With the declining inflation, there is potential for stabilization of food prices and energy costs. However, fuel prices may be influenced by global market conditions and are therefore more unpredictable. A low inflation rate, however, sends a positive signal for consumer prices overall.

In summary, Swedish households can expect a slightly lighter financial burden with the recent reduction in the key interest rate. If the current inflation trend persists, we may see further relief in interest rates ahead.