Swedens Policy Rate

Mortgage rates rise despite unchanged benchmark rate

On March 19, the Riksbank chose to keep the benchmark rate unchanged at 1.75 percent, citing very uncertain economic forecasts ahead. Despite this, several of Sweden's largest banks have raised mortgage rates during late March. This development has raised questions among households about why loans are becoming more expensive even when the central bank's rate remains steady.

What lies behind the banks' rate hikes?

According to experts and reports from various sources, the reasons for the banks' actions point to a combination of factors. Partly, it is about banks preparing for potential future rate hikes from the Riksbank, especially given that inflation remains at a high level and oil prices have risen. Banks may also need to cover their own rising financing costs and manage the risks posed by market uncertainty. Furthermore, the Riksbank has highlighted that a series of rate hikes could become necessary if inflation does not stabilize, contributing to the banks' cautious approach.

How are mortgages, personal loans, and savings affected?

• Mortgages: Households with variable-rate mortgages may see their monthly costs increase, even though the Riksbank has not changed the benchmark rate. For those who have or are planning to take out new mortgages, the banks' decisions mean that calculations may need to be reviewed.
• Personal loans: Personal loans are also affected by the banks' own interest rate settings, and a general rise in interest rate levels means that borrowing costs can increase.
• Savings: When banks raise lending rates, it can sometimes lead to higher savings rates, but this is not guaranteed. Households may need to be proactive and compare offers between different banks.

What does the difference between the benchmark rate and the mortgage rate mean?

The fact that banks are raising rates despite the benchmark rate remaining unchanged shows that there is no direct link between the central bank's rates and the banks' rates. The mortgage rate is set based on several factors, including the banks' own financing costs, risk assessment, and market competition. In times of uncertainty, banks may choose to act more cautiously to manage future risks, which is now visible in the form of higher rates for households.

How should households think about their finances?

• It is important to be aware that mortgage rates can change even if the benchmark rate does not, as the banks' risk assessment plays a significant role.
• Those with variable-rate loans should follow both the Riksbank's signals and the banks' actual rate announcements, as these can develop differently.
• Uncertainty regarding inflation and future rate decisions means households may need to calculate various scenarios for their finances.
• Regarding savings, it is important to pay attention to whether the bank raises the savings rate and to compare different options.
• There are no certain answers on whether it is best to fix or have a variable rate right now; the decision should be based on one's own financial situation and risk appetite.

Summary perspective on household economics

Recent interest rate developments show that households need to be prepared for loan costs to change rapidly, even without the Riksbank changing the benchmark rate. It may be wise to review both expenses and savings, and to be extra attentive to upcoming announcements from both banks and the central bank. Economic uncertainty makes it particularly important to have margins in one's budget.