Swedens Policy Rate

Mortgage Rates Rise Despite Unchanged Policy Rate – How It Affects Your Finances

Although the Riksbank chose to leave the policy rate unchanged at 1.75 percent on March 19, several major banks raised their mortgage rates during late March. This means that many households may already face increased interest costs, even though the official policy rate has not changed.

What has happened?

• The Riksbank recently decided not to change the policy rate, which remains at 1.75 percent.
• However, banks raised their mortgage rates during the period of March 30–31.
• Sources indicate that banks are making this move based on expectations of future rate hikes and ongoing concerns about inflation, rather than the current actual policy rate.
• Experts are discussing the possibility of a period of stagflation ahead—a combination of high inflation and low growth—which is influencing both banks' and households' assessments.

Why does this matter?

The fact that mortgage rates are rising independently of the policy rate means that household costs could increase faster than many anticipate. Banks are acting based on their own forecasts and potential future risks, meaning interest rate adjustments can occur before the Riksbank actually changes anything.

This affects not only those with mortgages but can also impact personal loans and savings rates. When banks' funding costs rise, or when they assess that the interest rate environment may change in the future, they may adjust their rates upward.

How should you think about your finances?

• Keep track of your interest rate: Your bank may have raised your mortgage rate even if you haven't heard of any change from the Riksbank.
• Expect higher costs: Since banks sometimes raise rates as a precautionary measure, there could be further increases before the Riksbank changes the policy rate.
• Savings: Savings rates may also be affected, but it is not certain that mortgage rate hikes will directly lead to higher interest on savings accounts. This can vary between banks.
• Plan your budget: Increased interest costs and continued inflation could put more pressure on household finances than the official policy rate signals. It may be wise to review both expenses and savings.

Important things to be aware of

• The policy rate and the mortgage rate are not the same thing – banks set their own rates based on several factors.
• Different banks may raise rates at different times, so the impact may be felt at different speeds for different households.
• Inflation is a key factor in banks' decisions. Continued high inflation can affect both interest rates and households' purchasing power.