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Sharp interest rate rises in late 2010: report

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08:53 CET+01:00
Homeowners will have less spending power by the end of the year according to a new report from state-owned mortgage lender SBAB, which predicts the Riksbank will begin a sharp interest rate increase in the autumn.

The report states that Sweden's central bank will to start to raise the benchmark repo rate from its current record low 0.25 percent after the summer.

Tomas Pousette, SBAB's chief economist, adds that the repo increase will continue sharply into 2011 with mortgage interest rates set to follow.

"The bottom for longer-term fixed mortgages has been reached and they will start to rise during the first six months of 2010," he said.

"By the end of 2011 we expect that three-monthly interest rates will have risen to around 3.5 percent," he says.

By December 2010, SBAB estimates that interest on a quarterly-fixed mortgage will be around 2 percent, rising to 3.35 percent in 12 months time.

For mortgages fixed over a 24-month period the estimated 3.65 percent interest will rise to 4.95 percent and five-yearly fixed mortgages will go from 4.90 percent to 5.50 percent.

According to Pousette, the anticipated repo rate rises can be attributed to the Riksbank's optimistic outlook for an economic upswing in the next year.

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