Most Swedes fail to prep for higher interest rates
TT/David Landes · 19 Oct 2009, 14:56
Published: 19 Oct 2009 14:56 GMT+02:00
- Payment problems plague more Swedish homeowners (05 Oct 09)
- Swedes predict property price increase (07 Sep 09)
- Interest rates to stay low until autumn 2010 (03 Sep 09)
Economists agree that the Riksbank will eventually raise rates, and that banks will follow suit, although exactly when remains unclear.
There is also broad agreement that Swedes holding adjustable rate mortgages should prepare for higher interest rates by either saving the difference between the interest they’re currently paying and what they would pay should rates move up to 5 to 7 percent – or start to pay down more of their loan.
But according to a study carried out by the Länsförsäkringar insurance company, very few Swedes have opted to follow economists’ advice.
In a recent survey, 86 percent of mortgage holders in Sweden haven’t made any specific changes to prepare for coming interest rate hikes.
During the last year, a household with an adjustable rate mortgage of one million kronor ($143,000) has seen its interest payments drop by about 4,000 kronor per month prior to tax deductions.
Within a year, interest rates are expected to rise. If rates climb to 4 percent by 2011, interest payments on a million kronor mortgage would be 2,000 kronor higher per month than they are today.
That so many Swedes have neglected to act is worrisome, according to Länsförsäkringar.
Only 6 percent of the survey’s respondents said they are saving more than they were previously.
Among cohabitating couples and married couples without children, the figure is only 3 percent.
Only 2 percent of respondent said they have started to increase payments on their principal.
Nine out of ten respondents also said they have no plans to take out new loans.
The results come from the responses of 7,800 people between 16- and 69-years-old who were interviewed by PFM Research at the request of the insurance company.