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INTEREST RATE

Sweden cuts key interest rate to new record low

UPDATED: Sweden's central bank (the Riksbank) has slashed its key interest rate, the repo, to new record negative levels just over a month after it announced a similar move.

Sweden cuts key interest rate to new record low
Swedish bank notes. Photo: Anders Wiklund/SCANPIX

"The Executive Board of the Riksbank has decided to make monetary policy even more expansionary by cutting the repo rate by 0.15 percentage points to -0.25 percent and buying government bonds for 30 billion kronor, to support the upturn in inflation," the central bank said in a statement on Wednesday.

Riksbank chiefs said  that recent appreciation of the krona risks breaking a positive trend of rising inflation and added that the central bank had therefore decided to make monetary policy even more expansionary by cutting the repo rate yet again.

"This is surprising," Torbjörn Isaksson, macro economist at Swedish banking giant Nordea, told news wire TT.

"But the Riksbank has decided to keep the krona weak and does not settle for the rise in inflation we have had," he added.

The unexpected decision, which will apply from March 25th, follows the bank's move on February 11th to cut the repo to -0.1 percent, the first time in history there had been a negative interest rate in Sweden.

The central bank added in Wednesday's statement: "The repo rate is expected to remain at -0.25 percent at least until the second half of 2016. After that, it is expected to rise gradually."

Negative rates work differently to positive interest ones when borrowers pay money lenders an interest rate, usually an annual percentage on the total amount of money borrowed. Meanwhile savers putting money into a bank can normally expect to earn interest on that cash.
 
When interest rates are negative, this relationship is reversed, so lenders – i.e. banks – have to pay to lend money or to make an investment.
 
The basic idea behind negative rates is to stop organisations or people from making risky investments or transactions that could impact on the wider economy.
 
The surprise decision could put increased pressure on a property market already under strain, Tor Borg, chief economist at Swedish mortgage firm SBAB, told TT.
 
"It remains to be seen how the market reacts, but I don't think it will have a great effect on property interest rates. Partly because it is still a small decrease, partly because property interests are already at very low levels."
 
"[But property prices] could end up going up some more, even though their interest rate is not affected. There is already a lof of activity on the property market, but there could be a psychological effect that causes the prices to rise even more," he said.
 
Wednesday afternoon's move came just hours after a new survey showed that Swedes were feeling more optimistic about their personal finances, although their confidence had yet to translate into increased consumption.
 
"It appears that the interest weapon which was supposed to get the ball rolling and increase consumption has not worked. We see that families prioritize savings and investment," Jeanette Hauff, Skandia behavioural economist, told Swedish news agency TT.
 
In February the krona hit its weakest level since the financial crisis. It has since recuperated slightly, with 9.1706 kronor required to buy a euro on Wednesday, compared to 9.6835 kronor a month ago.

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MONEY

What happens if you don’t pay a bill in Sweden?

Sweden's Enforcement Authority is responsible for collecting unpaid debts, fines, and declarations of bankruptcy. So, what happens if an unpaid bill reaches the Enforcement Authority, and can you do anything if you have a black mark on your record?

What happens if you don't pay a bill in Sweden?

What happens when you have a bill?

Usually, if you have a bill in Sweden, you will receive an invoice (faktura) either digitally or via post, which will include details such as the amount owed, who to pay and the date payment is due (förfallodatum).

If you don’t pay the invoice in time, the person you owe money to may turn the case over to inkasso, or a debt collection agency, who will again send you an invoice for payment, plus the agency’s fee.

If this invoice goes unpaid, the Enforcement Authority will get involved.

The Swedish Enforcement Authority, Kronofogden in Swedish, is responsible for collecting unpaid debts. It does this by providing advice and support to those who are unable to pay their debts, as well as helping creditors – such as, for example, landlords whose tenants have not paid their rent.

The debt collection agency will pass unpaid bills on to them, and you may receive a betalningsanmärkning or black mark on your credit record.

Before you receive a black mark, however, you will first receive an ansökan om betalningsföreläggande from the Enforcement Authority. If you pay this in time, your debt will not be registered as a betalningsanmärkning.

There are some types of payment where you can receive a betalningsanmärkning without the bill going through a debt collection agency first. These are usually payments owed to the state, such as unpaid tax, unpaid student loan repayments or unpaid municipal parking fees.

You are unlikely to come into contact with the Enforcement Authority unless you miss or forget to pay a bill.

What happens if you get a black mark?

A black mark can have pretty major consequences – it can stop you from hiring a car, getting a credit card, borrowing money (including getting a mortgage), taking out a phone contract or even renting an apartment, as well as barring you from ordering anything on credit or paying via invoice.

This is due to the fact that whenever you apply for a loan or credit in Sweden, the lender will check your credit score (kreditupplysning) to see if there is any risk of you not paying up. Many lenders have a strict policy on not lending to individuals with black marks on their credit score to minimise risk, no matter whether the mark is due to an unpaid phone bill or a missed mortgage repayment.

How can I check if I have one?

You can check if you have a black mark by contacting a credit check company – here is a list of all credit check companies in Sweden. Some may charge a small fee for the service, whereas others offer it for free.

One advantage of checking your own credit score before contacting a lender is that your credit score is not affected when you carry out a check on yourself. 

If, however, a bank carries out a credit check on you, this can affect your credit score – it’s usually not an issue if you carry out one or two checks, but a lot of checks in a short period of time could cause issues.

Can you do anything to remove it?

Unfortunately, no. 

All you can do is wait – a black mark will disappear from your record after three years for private individuals or five years for businesses. 

The best strategy is to avoid getting a black mark on your record in the first place – such as by paying your bills via autogiro (direct debit), keeping an eye on your post (as well as your digital post), and paying for items up-front if possible to avoid invoices, rather than using “buy now, pay later” credit services such as Klarna or Clearpay.

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