Swedens Policy Rate

Mortgage rates rise despite unchanged policy rate – how it affects your finances

At its meeting on March 19, the Riksbank decided to keep the policy rate unchanged at 1.75 percent. Despite this, several major banks have raised their mortgage rates during late March and early April. The banks state that the increases are due to higher costs for funding their loans as well as rising interest rate expectations in the market. Analysts from institutions such as SEB and the Swedish Economic Institute (Konjunkturinstitutet, KI) have also adjusted their forecasts, assessing that there is a risk that the Riksbank may need to raise the policy rate in the future, partly due to rising energy prices and continued inflationary pressure.

Why are banks raising mortgage rates when the policy rate hasn't changed?

Mortgage rates are often influenced by the development of the Riksbank's policy rate, but now several banks have chosen to raise their rates despite the policy rate remaining unchanged. According to experts, banks highlight two main reasons:

• Banks' own costs for funding lending have increased, leading them to charge customers higher interest rates.
• Market expectations suggest that the policy rate may be raised soon. This prompts banks to raise rates in advance to adapt to potential future changes.

This means that households with variable-rate mortgages may face higher interest rates immediately, even though the Riksbank has not changed its policy.

What does this mean for mortgages, personal loans, and savings?

• Mortgages: If you have a variable interest rate on your mortgage, you may already have seen an increase in your monthly costs. This also applies to certain fixed-rate loans during renegotiation.
• Personal loans: Interest rates on personal loans are often affected by similar factors as mortgages. Here too, costs may increase if banks perceive higher risks or increased funding costs.
• Savings: Savings account interest rates tend to rise more slowly than loan rates. If inflation is higher than the interest rate on your savings account, the real value of your savings decreases.

How should households and savers plan ahead?

• Expect housing costs to increase further if the Riksbank raises the policy rate in the future. Many analysts point to this risk, though the exact timing remains uncertain.
• Check the interest rate on your mortgage and be prepared for it to change quickly if you have a variable rate.
• If you have significant funds in a savings account, remember that the interest rate often does not compensate for inflation. Review whether you need a larger buffer or if you can allocate parts of your savings differently.
• Be aware that new loans with variable rates may become more expensive if interest rates continue to rise.

It is important to remember that banks' decisions regarding mortgage rates can vary between different banks and loan types. Forecasts regarding the policy rate are uncertain and are influenced by factors such as energy prices and inflation. The fact that the policy rate was not raised in March does not mean that the interest rate environment will remain stable in the future.