A typical Norwegian family is at risk of facing 30,000-40,000 kroner ruins next year as a result of electric shock and high interest rates.
Norges Bank will raise the key interest rate at its interest rate meeting on September 23. This is the first of five interest rate hikes in 2021 and 2022. At the same time, electricity prices are skyrocketing and there is little sign that lower electricity prices will move forward.
So it goes to the double foot for homes, which is more than a 3 percent wage increase.
– Electricity prices are ruthless. They don’t take into account what financial situation you are in, so here you need to take good care of yourself and follow, ”Consumer economist Thea Olson at Netizen Bank tells NetvisionSkonomy.
At the border
– Are you worried about housing finances considering both interest rate hikes and higher electricity prices?
– Yes, I worry about families living within their financially affordable boundaries. Probably many more are unaware or unaware of the importance of electricity prices for their personal finances.
– If we take into account the current high electricity prices, including the high interest rate hike in the coming year, it becomes clear that this will affect the private economy of many Norwegian households, Olson responds.
Trond Omdal has been a director of Ohio and one of Norway’s leading oil explorers for more than a decade. He fears that rising energy prices this winter could lead to death in Europe. Omdol fears that people may die as a result of higher energy prices (Watch the video below).
Dor Rear Lilholt, head of Value Insight AS Analysis, calculated a little on the increased power costs at the request of Netavision. The pure electricity connection below has a direct cost per hour for consumption, including VAT on this amount. Note Thus the annual consumption is 20,000 kWh.
Keep in mind that the cost can be significantly higher in the winter with higher consumption. Lilholt says the real electricity price in southern Norway will be around 100 100 per kilowatt before VAT for winter and 50 re per kWh for summer next year.
We expect to spend 18,000-20,000 kroner on clean electricity next year, but warn that a more pressurized hydropower situation could further push up prices. The unrealistic level of electricity prices, equivalent to an average of 80øre / kWh next year, offers more than 20,000 costs for electricity, including VAT.
Annual electricity costs have varied greatly in recent years. In 2019, an almost normal year, Lilholt estimates that costs will be NOK 10,400. But by 2020, the cost of electricity will have dropped to an exceptionally low NOK of 2,600. This year and next year comes the electric shock.
For 2021, we expect NOK 17,500 based on market prices over the past three months. These months alone represent more than 6,500 kroner. By 2022, we estimate 16,000 kroner, then we have only market prices. The highest price expectation is 15-20 re per kWh.
Keep in mind that the coming winter is very important. We may have significant changes over the next year and there may be great uncertainty in both directions. Prices could also be significantly higher, Lilleholt warns, about the prices we saw this summer.
But the cost of electricity is not a complete calculation, in addition there are fixed charges.
What will be the total electricity bill for an average household next year?
– This will vary for each region. In the north, the bill will be significantly smaller. But if you take into account that higher consumption comes at a higher price, you should be prepared to spend up to 2 kroner on average in southern Norway, Lilholt responds.
Then the average home speaks of up to 40,000 kronor 20,000 kWh per year consumption. According to the expert, market expectations may be under this, perhaps up to NOK 30,000.
– When a hydropower crisis occurs in southern Norway, we expect Nordic prices to be closely linked to higher European prices, says the head of the analysis.
Olson says it’s important to be financially well-prepared for the electricity price you expect this fall and winter. You avoid a big surprise when Bill suddenly comes in the mail.
– As of now, I think it makes sense to have a separate power buffer so that the surprises in the electricity bills do not magnify when they appear in the mailbox again and again.
– Check your electricity contract and there is no reason to pay more than you owe. There are countless offers from suppliers that, as they appear, are not necessarily the same, Olsen says, reminding us that heating homes is a huge expense for energy consumption.
Then there are interest rate hikes. The mortgage rate can be as high as 1.25 percent a year. The average interest rate will rise from the current 1.75 per cent to 3 per cent. For a NOK 2 million mortgage, the monthly term then increases from NOK 8,236 to NOK 9,484.
In the pre-tax year it was NOK 15,000, which is an annual loan of 25 years. For a 3 million mortgage, we are talking about a monthly increase from 12,354 kroner to 14,226 kroner and 22,000 kroner per month. The total increase in interest costs and electricity prices would be NOK 30,000-40,000 per year for an average household.
5 percent points
Banks take into account that the borrower has to bear a five percent interest rate increase. But it is clear that higher electricity prices and rising interest rates may come as a surprise to many. Olson says this will greatly affect the personal finances of many households.
– Increased electricity prices and rising interest rates combined could lead to the impact of several thousand kroner a month, which would be a major intervention in the wallet for many, he continues.
– How are families affected by this?
– It depends on the financial status of the individual. Regardless, I think it’s important to be financially well-prepared for what can come from bills in the fall and winter. During epidemics, many people experienced the importance of buffer account. I want to say the same thing now.
With the increased fixed costs associated with mortgages and electricity, having a good buffer account for unforeseen expenses pays off. When the car goes to a workshop, the washing machine malfunctions or the mailbox receives a very high electricity bill, Olson responds.
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