Interest and housing | Warns about the freedom of installments: – You get less equity in the house itself

Interest and housing |  Warns about the freedom of installments: – You get less equity in the house itself

(The newspaper online): Experts expect that the Norwegian Bank will hit with an interest rate hike on Thursday. Your mortgage interest rate will rise as a result.

One possibility that many Norwegians saw in the past year was the freedom to pay premiums.

This means that you do not pay installments on the loan, only interest. It can reduce monthly expenses by several thousand Swedish krona.

– It is important to remember that you should not ask for payment freedom in order to maintain high consumption or financial flexibility, consumer economist Thea Olsen from Danske Bank tells Nettavisen.

The freedom of installments should not be a cushion for comfort, adds the economist.

-It will be more expensive overall

Luxury habits, vacations and concert experiences should be cut back before you ask the bank for help.

– By taking interest-free installments, the loan becomes more expensive overall. You get less equity in the home itself on the day you, say, upgrade a condo or buy a more expensive home, Olsen says.

Olsen recommends that Norwegians have a healthy relationship with interest-free instalments.

– When you have the opportunity to pay it back, you should. A prerequisite for obtaining a loan is that you are actually able to service it.

– Exceptions may be granted

But this scheme is for customers who have low loan-to-value ratio. The mortgage must be within 60 percent of the home’s value.

But banks have the opportunity to make exceptions.

Exceptions can be made, for example if you are on sick leave for a longer period or there is a change in your life situation that makes it financially difficult, says Olsen.

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– Decrease in the number of customers calling

Despite frequent interest rate increases in the past year, Danske Bank has actually seen a slight decline in interest-free repayment requests recently.

– At Danske Bank, we see a marginal change in progress from customers who want to modify the term or freedom of installments. Fewer customers are contacting Danske Bank today than a year ago when it comes to interest-free installments, Martin Bud Fife, head of the personal market at Danske Bank, tells Nettavisen.

– What is the usual length of time for a grace period?

– There is no conclusion on this matter. There are significant individual differences here. The most common is 1 to 5 years, but Danske Bank does not give interest-free installments for more than 10 years at a time, says Fife.

– Adjusts their consumption to a new reality

SR-bank is seeing a 20 percent increase in interest-free installment requests if you look at the past two or three months. The bank stresses that it is coming from low levels during the pandemic.

Development has now returned to the normal level we witnessed in the pre-pandemic period. It is expected that a small number of clients will need advice after the autumn, when interest rate increases will take full effect. Most people seem to be adjusting their consumption to match the new reality, says Product Manager for Home Loans Andreas Thorsdalen Tveit of SpareBank 1 SR-Bank.

The bank believes that many of its clients can afford the current interest rate level.

– Of course, more people will be able to borrow less now than before, because we take into account increased interest costs when we calculate how much the customer can repay in the loan application, says Marie Lovaas, Senior Communications Advisor at SpareBank 1 SR-Bank, to Nettavisen .

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Dalila Awolowo

Dalila Awolowo

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