Although vaccine coverage in Norway is good, the corona epidemic is not over yet. Thus, we are facing another year of great uncertainty.
It’s not easy to know for sure how the new year will affect your finances, but consumer economist Thea Olsen at Danske Bank gives you her best predictions based on what seems likely now.
Greetings to those who have jobs
The finances of many Norwegians will be closely linked to whether there will be lockdown and corona measures.
After new rounds of dramatic infection control measures, our thoughts go to those with an unsafe job. The good news, Olsen says, is that the new government is introducing a wage subsidy, so employees can keep their jobs even if there is little work left.
Although some are facing an uncertain time, she believes the vast majority will enter the new year with optimism.
Some are laid off again, while others save money like never before. Aside from those laid off, there is a party in the Norwegian economy, says Olsen.
Frank Gollum, chief economist at Danske Bank, forecasts GDP growth of 4.0 percent in 2022.
Olsen says he points to a very good economic year for Norway.
The Norges Bank has made it clear that the key interest rate will rise in 2022.
If the economic development is about as we now imagine, the rate is likely to rise further in March, Central Bank Governor Osten Olsen said when the Bank of Norway raised the interest rate from 0.25 to 0.5 percent in December.
The central bank wrote: “The outlook for the key policy rate has not changed much from the previous monetary policy report and means that the interest rate will rise gradually over the next few years.”
In short, the key policy rate is the interest rate that banks receive on their deposits with the Bank of Norway. Making changes to the key policy rate is one of the most important tools that Norges Bank has for controlling the Norwegian economy, and it affects you directly.
You will be particularly affected if you have or plan to take out a mortgage. One of the things that Norwegians notice most when the key rate is raised is that the mortgage becomes more expensive.
An increase in interest rates is actually an indication that the Norwegian economy is doing well, and may, for example, lead to higher wage growth.
Shortly after the outbreak of the Corona pandemic in Norway in the spring of 2020, Norges Bank lowered its key interest rate to a historically low level of zero percent.
If one thing is certain, it is that interest rates will rise even more. Norges raised rates twice in 2021, and we expect three more rate increases through 2022. In practical terms, this means mortgage interest expenditures could double over the course of the year compared to the bottom in 2021, Olsen says.
interest rate example
Thea Olsen has prepared an example showing how much a recent interest rate increase plus three more interest rate increases can mean your mortgage expenses.
– If you have four million kroner loans, and the interest rate triples in 2022 by 0.25 percentage points each time, you can expect your interest expense to increase by 40,000 kroner per year, before taxes. That’s roughly 3,300 NOK a month, Olsen says.
Many Norwegians have more than four million loans, so this amount can be much higher for them.
– Then it is important to emphasize that these are purely additional expenses for the family. This interest expense is added to the interest you are already paying today.
When interest rates go up, it becomes more expensive to get a mortgage. This means that people are getting less loans from the bank, which in turn can lead to lower house price growth. After a few years of skyrocketing home prices, chief economist Frank Gollum expects home prices to rise by just over 2% in 2022.
This means that you may have to lower your expectations if you are to sell your home next year. It could also mean that those entering the housing market get a somewhat easier way if the mega-bidding rounds drop, Olsen says.
Read also: Here’s what experts think about the housing market in 2022
During 2021, we encountered what economists call “bottlenecks” in the economy, related, for example, to shortages of natural resources or labour.
There are problems in obtaining some factors of production, which leads to an increase in prices. We remember, for example, the soaring timber prices that drastically lowered many people’s wallets, says Olsen.
When prices go up, your money becomes less valuable. This phenomenon is called inflation. In 2022, Danske Bank expects inflation to reach 2 percent.
– It may seem small, but on average it is high. There is also a risk that prices could rise significantly more, Olsen says.
general salary increase?
Many store shelves have faced empty over the past year. You might remember some goodies sold out before Halloween, or an XXL that failed to deliver enough bikes.
Most commercial companies faced challenges either small or large during 2021. We believe challenges will follow companies in the new year, and there are many indications that Omicron will only intensify the challenges, Olsen says.
The labor market in many industries is tight, and it is difficult to find qualified workers.
– It may seem a little scary, but for you as a salaried being, it is positive. Danske Bank estimates that the overall wage increase will increase by more than three percent by next year, but it could get even higher quickly as well, Olsen says, and continues:
– If you are unhappy with your salary, next year may be the one that you consider having a conversation with your boss about increasing your salary.
Read also: high wages? How do you convince the president?
Record high electricity prices affected the finances of many families with young children in the last months of 2021. The type of electricity prices we will get in 2022 will depend on various factors.
– But the good thing is that the government covers half the price of electricity, which exceeds 70 euros per kilowatt-hour. Olsen says that could mean about 1,000 kronor a month to support a family in a separate home.
In the new year, a number of changes announced in the state budget will also take effect.
The new government will increase taxes next year, especially for those with the highest incomes, says Olsen.
Read also: These changes will come into effect from the new year
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