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Sweden's Riksbank set to raise interest rates

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07:58 CET+01:00
Sweden's Riksbank is expected to hike base interest rates on Tuesday, with more rate increases expected for the coming months.

Most observers agree that when the Riksbank announces the results of its deliberations today, it will be announced that the repo rate will be increased by 0.25 percentage points to 1.50 percent.

The move is set to be the first of several moves to tighten monetary policy in the coming months with the Riksbank's December forecast indicating that the repo rate will be at 2.9 percent during the last quarter of 2012.

As a result of the expected rate increases, the cost of an average mortgage is set to climb 2,300 kronor ($354), based on a calculations by Nordea bank developed on behalf of TT's behalf, for a one-year fixed rate mortgage of 2.8 million. Over the court of a year a family will have to find an extra 28,000 kronor to service their mortgage.

"I will follow the interest rate announcement, but without biting my nails. We can handle a pretty hefty increase, our variable-rate loans have been as high as 5.5 percent," said Kristin Lärje, silversmith, mother of two and mortgage holder.

The Lärje family also includes father John who is an AV technician at a museum, 12-year-old son Vill, and daughter Nin who is five-years-old. They live in a yellow, polished semi-detached house of approximately 100 square metres in the suburb of Enskede in Stockholm, which they bought eleven years ago.

Nordea family economist Ingela Gabrielsson, is among the market analyst forecast that for the Lärjes and families like them, higher housing costs are in store.

"We are facing a series of interest rate increases, all the forecasts say so and that is what we will use as a base (for our credit decisions), said Gabrielsson.

After having enjoyed a long period of record low interest rates in the wake of the finance crisis, Gabrielsson warned that many families should review their finances.

"The important thing now is that you can county realistically on what the interest rate hikes may cost while looking over savings and may be investigate if there are any other monthly expenses you can cut back on."

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