February 4, 2023

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In 2019 went to a flat rate – saving several thousands a month – E24

A fixed-rate contract can save couples a lot of money and sleepless nights. A BI researcher says that Norway’s innocence is one of the reasons for the vanishing interest rate cap.

– After we bought the cabin, we had several loans, and it would have been difficult if the interest rate had doubled, says Martin Landswerk. Together with his wife Maria Berg Landswerk (39), he has debts of more than five million kroner.
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– For me, it’s a mystery that more people don’t fix the interest rate, says Martin Landswerk (39).

He and his wife Maria Berg Landswerk (39) took out a loan to build their own house in Farsund in 2015. Three years later they bought a cabin in the same place. In total, the couple has debts of NOK 5.1 million.

In November 2019, the floating interest rate on the couple’s loan was 2.3 percent. Nevertheless, they chose to fix the interest rate at 2.8 for a ten-year period.

– After we bought the cabin, we had a lot of debt and it would be difficult if the interest rate doubled. We thought we had very little to lose in fixed interest. Historically, 2.8 is a relatively low interest rate. It was an amount we were very comfortable paying monthly, says Landswerk.

Now it pays well.

– Compared to the floating interest rate, I would guess that we would save NOK 7,000 to 8,000 per month. Not least, it saves many sleepless nights, says Landswerk.

The estimate is consistent with the calculations of E24. After six rate hikes, the key interest rate ended the year at its highest level since 2008. Norges Bank expects mortgage interest rates to peak at 4.3 percent during 2023.

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Kjell Jørgensen is Associate Professor of Finance at BI Norwegian Business School.

Thumbs up from the expert

Kjell Jørgensen, professor of finance at the BI School of Business, believes that Martin and Maria made a chess move.

– From my point of view, this was obviously done smartly. He has paid something like an insurance premium for the past two years, and he says he will definitely save a lot of money over the next six years.

Read on E24+

Experts: These will be housing winners in 2023

In an interview with Nettavisen in March 2019, Jorgensen said that interest rate equalization would be profitable because of upcoming interest rate hikes.

– You don’t need to be Nostradamus to understand that interest rates will eventually rise to where we are now, says Jorgensen.

Very small spread

Very few Norwegians have fixed interest rates on their mortgages, making Norwegian households particularly sensitive to interest rate increases. Fixed-rate mortgages accounted for only six percent of Norwegian mortgages in the 3rd quarter of 2022, according to Statistics Norway.

Notably, some Norwegians have signed a fixed-rate contract with the bank to make Jorgensen disappear.

– Norwegians apparently have a unique innate sense of security. We are a bit naive and expect the government and the oil fund to bail us out if things go really bad. In other countries, he says, people tend to insure themselves if they can, if they’re used to more volatility and more turbulence in the economy.

– We insure ourselves in all other ways, but when it comes to mortgages, very few are willing to risk a small loss to insure us, he adds.

– Difficult to understand

Martin Landsverk and his wife have two children aged 12 and 14. The father of the family says he wonders why more Norwegian families with children don’t get predictable loan terms through fixed-rate contracts.

– I don’t understand how other families can manage skyrocketing electricity prices, high inflation, high cost loans and a government that is paralyzed in action.

– Even during the pandemic, when the prime interest rate went to zero, people chose to tie the interest rate. It’s hard to fathom, but maybe it’s because my generation has never experienced a sharp rise in interest rates — only that asset has grown tremendously in value, Landswerk adds.

The 39-year-old admits he is a little bitter that he didn’t wait six to seven months to fix the interest rate. During the interest-free period, Landsverk estimates he lost NOK 5,000 to 7,000 a month on the fixed-rate contract.

Central Bank Deputy Governor Øystein Børsum at Norges Bank.

Deputy central bank manager with fixed interest rate

When there was zero interest and the pandemic, one person who set the interest rate on his mortgage was Øystein Børsum, deputy governor of the central bank at Norges Bank. During that time, he served as Chief Economist at Sweetbank.

At the time, Børsum chose to peg the interest rate to show how confident he was that Norges Bank would raise interest rates faster than expected.

Børsum tells E24 that he will keep the same fixed interest rate as when he took office. Beyond that, he declined to comment on his own interest rate conditions and was referring to his new role as the Fed’s deputy governor.

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