Swedens Policy Rate

Mortgage rates rise despite unchanged policy rate – what does it mean for your finances?

The Riksbank has recently decided to leave the policy rate unchanged at 1.75 percent. Despite this, several of the largest banks have raised their mortgage rates during late March. This means that household interest costs may increase even though the central bank's official rate has not changed.

Why are banks raising mortgage rates?

Sources indicate that the banks' increases may be due to several factors. A key reason highlighted is that the market is now pricing in the risk of higher inflation and future rate hikes. Rising oil prices and concerns about so-called stagflation – that is, high inflation combined with weak growth – are mentioned as factors that could push up expectations for future interest rates. Banks may therefore choose to adjust their rates in advance if the costs of borrowing money in the market are assessed to increase.

It is important to understand that mortgage rates are not directly controlled by the Riksbank's policy rate, but are influenced by the banks' own financing costs and their assessment of future risks.

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

• Mortgages: The monthly cost of mortgages may increase even if the policy rate remains unchanged. This can affect the household budget and make it more difficult to forecast future expenses.
• Personal loans: The market is signaling higher costs ahead, which means that interest rates on personal loans may also rise. If you are planning to take out new loans, it may be extra important to compare terms and follow the development.
• Savings: Savings rates are often affected more slowly than mortgage rates. If banks expect higher interest rates in the future, the return on savings may eventually improve, but this does not always happen at the same time as mortgage rates are adjusted upwards.

Uncertain forecast and what you as a household can do

The Riksbank emphasizes that the forecast for the interest rate situation is very uncertain. Analysts point out that a series of rate hikes could come earlier than the market previously thought, especially if inflationary pressure continues. At the same time, there are also assessments suggesting that the situation could stabilize if oil prices and inflation are dampened.

For households, this means it may be wise to:

• Regularly check if your mortgage rate has increased, even if the news signals that the policy rate is unchanged.
• Prepare for the possibility that interest costs may rise faster than the Riksbank's official forecast indicates.
• Follow the development of oil prices and inflation, as these factors often influence banks' actions.
• Be extra attentive to the terms if you are planning to take out new personal loans, as the market now points to higher borrowing costs.

The difference between the policy rate and the mortgage rate

The policy rate is the tool the Riksbank uses to influence inflation and economic activity. The mortgage rate, on the other hand, is determined by the banks and is influenced by more factors than just the policy rate. It is therefore possible for mortgage rates to move upwards even when the central bank waits. This can create a feeling of uncertainty for households, but it is a result of banks trying to account for future risks that are not yet visible in the official policy rate.

Concluding thoughts

Currently, there is an unusual situation where household borrowing costs are increasing without the Riksbank having raised its rate. This shows that banks are adapting to changes in market expectations – and that households may need to be vigilant about more signals than just the Riksbank's announcements. Following the development regarding inflation, oil prices, and the banks' own interest rate announcements provides a more complete picture of how your daily economy may be affected in the future.