Swedens Policy Rate
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Mortgage rates rise despite unchanged policy rate – how this affects your finances
On March 19, the Riksbank decided to keep the policy rate unchanged at 1.75 percent. Despite this, several of the largest banks have raised their mortgage rates towards the end of the month. This means that households with mortgages may face higher monthly costs, even though the official policy rate has not changed.
What has happened?
- The policy rate remains at 1.75 percent following the Riksbank's meeting in March.
- Major banks have raised mortgage rates towards the end of March.
- Banks cite uncertain inflation and expectations of future rate hikes as possible reasons for the increases.
- The Riksbank has warned that a series of rate hikes could come sooner than the market expects if inflation does not stabilize.
Why does this matter?
For households with mortgages, the banks' increases mean that housing costs can rise immediately, even if the Riksbank has not changed its policy rate. This demonstrates that banks' own forecasts and assessments of the economy can influence mortgage rates before an official rate announcement. The fact that mortgage rates move before the policy rate makes it more difficult to predict exact costs and plan your finances.
Uncertainty surrounding inflation, linked among other things to energy prices and the global situation, means that both banks and the central bank are expressing caution. Banks act based on their own risk assessments, and it is not certain that all banks will act in exactly the same way or at the same time.
How to think about mortgages, savings, and daily finances
- Mortgage cost: Check if your bank has adjusted the interest rate on your loan. Even if the policy rate is unchanged, your rate may have changed.
- Refinancing: If rates are raised in advance, it can affect the ability to renegotiate loan terms. It may be wise to compare offers and terms if you are considering switching banks, but avoid drawing hasty conclusions about future interest rate levels.
- Savings: Interest rates on savings accounts can also be affected, but often with a delay. Keep an eye out for any changes from your bank.
- Budget: Prepare for the possibility that housing costs may increase even without the Riksbank raising the policy rate. It may be prudent to review your household budget and create margins for uncertainty.
Important distinctions to keep in mind
- The policy rate is set by the Riksbank and affects the entire economy, but banks' mortgage rates are also driven by their own assessments and funding costs.
- Mortgage rates can be raised or lowered independently of the policy rate.
- There is no guarantee that banks will lower rates as quickly as they raise them.
- The Riksbank's future decisions are uncertain, and it is important not to take today's levels for granted over the long term.
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