December 9, 2022

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interest, interest rate increase |  This is how much your mortgage cost has become more expensive in three months

interest, interest rate increase | This is how much your mortgage cost has become more expensive in three months

Last week, the Bank of Norway hit the big drum again with a double jump in interest rates and raised the interest rate by another 0.5 percentage point.

And the The caveat is that the interest rate will go up even more.

On Monday, the DNB announced that the mortgage interest rate will be set accordingly. The special thing about the interest rate hike this time is that they are so large and so close together that the change from the previous interest rate jump has not yet reached ordinary consumers.

In fact, the interest rate jump that occurred at the start of the summer holidays didn’t have its full effect until this week for some.

Your interest rate lags far behind

A very simplified process for raising interest is as follows:

  • Norges Bank raises interest rates with immediate effect
  • Within days, major banks decided to follow suit
  • Existing loan customers are given at least six weeks’ notice before the interest rate increase takes effect

Above all, an interest rate increase usually does not have its full effect from the first loan maturity date, because the time for an interest rate increase is often in the middle of the month.

Banks usually offer the option of scheduling the loan due on the same day the salary is paid, so the effect of this delay varies widely among loan customers.

Example:

  • June 23 Norges Bank raised interest rates by 0.5 percentage point
  • June 29 Notify DNB customers of the interest rate increase
  • The interest rate change was the effect of August 10
  • When the loan is paid off August 25 Nearly half of the effective interest rate
  • When the loan is paid off September 25 The rate hike had the full effect
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This means that the full effect of the rate hike before the summer holidays is now fully felt only for some clients, a three-month delay.

But since then, Norway’s central bank has raised the interest rate by a full percentage point.

Also Read: DNB Raises Mortgage Rate

What is the cost of the loan?

With a normal interest rate increase of 0.25 percentage points, the impact of interest rate changes is relatively small for most family economies. But when interest rate increases are too large, they are greatly felt.

From June to date, the rate has been raised by 1.5 percentage points and as much as 2.25 percentage points since the rate hikes began exactly one year ago.

In the table below, we’ve calculated the increase in the cost of various mortgages, both as interest rates have risen since this summer, and since the rate increases began.

1.5% increase (since June)
2.25% increase (since last year)
religion annual Per month annual Per month
1 million dollars 11700 975 17550 1463
2 million 23400 1950 35100 2925
3 million 35100 2925 52650 4388
4 million 46800 3900 70200 5850
5 million 58500 4875 87750 7313
7.5 million 87750 7313 131625 10969
10 million dollars 117000 9750 175500 14625

The figures in the table take into account the 22 percent tax credit on debt interest. Installment Effect It is removed.

I think the interest rate will go up even more

The key rate is currently at 2.25 percent, and the Norges Bank expects to continue increasing key rates further. They think it could end at 3 percent by winter.

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In this case, this means another increase of 0.75 percentage points.

The effect of this jump in interest rates will increase expenses compared to last year which is very noticeable for most people:

Another 0.75 percent increase
3 percent in total
religion annual Per month annual Per month
1 million dollars 5850 488 23400 1950
2 million 11700 975 46800 3900
3 million 17550 1463 70200 5850
4 million 23400 1950 93600 7800
5 million 29250 2438 117000 9750
7.5 million 43875 3656 175500 14625
10 million dollars 58500 4875 234,000 19500

Homeowners: – Now we have to wait for the effect

Interests organization Huseierne now believes Norges should slow down and wait for the impact of the rate increases that have already been implemented.

The Bank of Norway has already announced that it is considering raising the new interest rate at its November 3 interest rate meeting. We at Huseierne don’t think it’s a good idea. Because now interest bills are starting to appear in the wallets of Norwegian households. At the same time, almost all other costs go up, such as electricity, food, fuel and municipal taxes, communications director Carsten Henrik Behl wrote in Suspension.

The interests organization is concerned that the previous rate hike did not take effect until the latest rate hike was implemented.

– We at Huseierne that it is important to gain knowledge about the impact of past and current increases in interest rates on households. They pointed out that we do not want this before Christmas approaches.