After the outbreak of the corona epidemic in Norway, mortgage rates plummeted and many Norwegians were able to rejoice over low interest costs. But, two years later, the situation is completely different.
The economy is at full speed, with low unemployment and high inflation for many years. One of the key tasks of Norges Bank is to raise the inflation target to 2 percent.
This week, as expected, a new rise in interest rates was announced. Not only that, the central bank has now announced eight interest rate hikes over the next two years. In practice, the floating mortgage rate increases by two percentage points to about 4 percent or slightly less.
Netavicen experts believe that it may be more appropriate now to build interest rates for a long time.
– Fixed interest rate rises quickly
For a NOK 3 million loan, the NOK would be more than 60,000 in annual interest expenses, before the 22 percent tax deduction. In a year, the same loan will cost NOK 30,000 more than it is now.
While the floating mortgage rate will be less than 4 per cent in two years, the fixed interest rate is currently significantly lower than that. An overview of the Norsk Family Economy website shows this Most banks now offer five-year fixed interest rates of around 3 percent.
If the interest rate path is as Norges Bank believes, if you build the interest rate now, the NOK 3 million loan in two years will be less than NOK 30,000 per year.
But personal finance expert Hallgeir Kvadsheim, who is also known from the TV series Luksusfellen, believes this may change soon:
– Fixed interest rates may rise faster. I think it will rise further. Banks may raise prices if demand increases, however they may be a little late in converting fixed rates. But there is a rule that some banks cannot set a fixed interest rate until new interest rates are set, so be careful not to tie in with an unknown rate, says Kvadsheim.
– Can take large loans
Bjørn Erik Sættem, a savings economist at Nordnet, has himself leveled interest rates.
– I had a fixed interest rate several times. I like the predictability, and it has given me the courage to take on a slightly bigger loan, ”he tells Netavicen.
Now, on the other hand, the fixed interest rate has risen, and Sættem says that if you build a loan for ten years, the best banks will offer a fixed interest rate of about 3.3 percent.
– You should look at fixed interest rates as insurance. If you do not tolerate an interest rate of more than four to five percent, you must pay off the entire or part of the mortgage – for at least five years, Sættem recommends.
On the other hand, he believes that if you find that the economy is broad enough to cope with such a rise in interest rates, you will get better service with floating interest rates.
– Guaranteed to lose the first year
However, he asks you to focus on one thing:
– If you tie the interest rate today, you are sure to lose the first year because the floating interest rate will take time to get to the current fixed interest rate level, he says.
No one knows what will happen in the next three, five, ten years, and it is impossible to say whether the interest will build up and benefit.
According to Norwegian statistics Only one in 20 Norwegian homeowners will have a fixed interest rate by the end of 2021. Only 1.2 percent have set interest rates for more than five years.
– Norwegians are ready to take risks. Norwegians look in the rearview mirror as we plan ahead, and now we have been dropping interest rates for more than 30 years. So in the past, S பெரும்பாலும்ttem says it was often not paid with a fixed interest rate.
– People have better advice than they think
– According to the usual advice, if you do not tolerate the 4 percent interest rate, now you can build it to three, says Quadsheim.
But he is skeptical of many of the banks’ studies on what the private economy can withstand.
– They like to say that such and so many interest rates cannot be dealt with. But you have to bring a pinch of salt. Quadsheim says that if there was a two percent interest rate increase now, many would be more adaptable than they thought.
Many economists are currently talking about the negative vortex, where prices for fuel, electricity and more are coming at a time when interest rates are rising. This can trigger higher wage demands, which in turn lead to higher inflation and higher interest rates.
– 2023 is not sure what will be terrible
Quadsheim still believes that wage growth should be included in the calculation:
– A 3-4 percent wage increase would offset the interest rate hike for many Norwegians. It’s not sure if 2023 will be completely scary.
In other words, wage growth will eat away at some of the costs of rising interest rates.
At the same time, Kvadsheim always wants to dispel the myth that floating interest rates pay:
– It’s a little more balanced. 7-8 years ago the risk of losing a lot of money was high. In recent years, we have been floating and fixed at 1-2 per cent – if so, it is better to lose something special in building interest rates.
– By definition, it will pay later
Therefore, it is wise to divert your attention to auto-pilot, the economist recommends:
– But you might be a little lucky.
Whether it works now depends more on what you believe, Quadsheim insists:
– If you trust Norges Bank, it will by default pay an interest rate of three per cent because they expect interest rates of up to four. If you trust the market, it is less secure. Fixed interest rates offered market – These are the expected interest rates of the market, but no one knows what the final price will be.
Hallgeir Kvadsheim recommends binding for at least five years because the biggest gap between today’s fixed interest rates and interest rate expectations will be yours.
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