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‘I’m holding out for some relief’: High interest rates hit foreigners in Sweden

Many foreigners living in Sweden bought their houses or apartments recently, closer to the market peak. The Local spoke to some of them about how recent hikes in interest rates have hit their finances.

'I'm holding out for some relief': High interest rates hit foreigners in Sweden
Nonó Gőbel, from Hungary, is struggling to pay for the house she and her husband bought for their three children. Photo: Private

Renata Matošina, from Croatia, Nonó Gőbel, from Hungary, Attiqe Rehman, from Pakistan, andHeather from the UK, and  all bought their properties in 2021 and 2022, close to the peak of the market but before most people had realised where interest rates were headed. 

Today, it’s clear that the calculations most of them made about their home’s affordability were well off the mark. 

“I feel fucked,” Matošina, who bought in March 2022, complained. “The prices of the properties went down and interest rates went up. Our initial costs of new home went up 50 percent in just eight months!” 

She and her husband took out a loan of 1.8 million kronor to buy an apartment for 2.1 million kronor. The apartment is now valued at 1.7 million. They are already in negative equity.

“It’s hard not to feel cheated,” she told The Local. “I bought a ticket, but I missed the train, like everyone was riding on 1.5 percent, 1.7 percent [mortgage rates]. And we jumped on that train.”

Renata Matosina and her husband have seen their housing costs double in just eight months. Photo: Private

Nonó Gőbel, from Budapest, who bought in May 2021, has seen her mortgage payments nearly double from about 5,000 kronor to about 9,000 kronor over the past year. 

“I’ve been wondering for months if we’re doing something wrong – more specifically, if us being foreigners means there’s some secret financial hack we’re not aware of,” she says. “But judging from other people’s comments, everyone’s in the same boat.”

Heather, who has to pay her mortgage out of a single income, says that she feels “trapped” by the sudden rise in costs. 

“I feel I’m just about managing month to month and things are only going to get tougher… yet selling to downgrade doesn’t feel like a smart option either due to the falling property prices,” she told The Local. 

Only one of the readers we spoke to, Attiqe Rehman, from Pakistan, decided to get a fixed-rate mortgage, getting a five-year deal when he bought his house in Hörby, 30 minutes outside Malmö, back in November 2019. 

“Thank goodness, at the time I fixed the interest rate at 1.6 percent for five years. One of the smartest decisions I made,” he said. “For me, it was important that I know how much I was spending each month, and with that I knew it was always under 3,000 kronor or something.” 

At the time, a variable rate mortgage was only slightly cheaper, at about 1.3-1.4 percent, he added.

He said he hoped that by the time his mortgage runs out at the end of 2024, rates will have fallen somewhat .

“I do hope that by that time, it goes down. But from what I’m hearing, in the old times it was quite a lot higher, but let’s see.”

Attiqe Rehman was lucky enough to take out a five-year fixed rate mortgage. Photo: Private

For Matošina, what makes it especially painful is how much her other costs have gone up. 

“We had aimed to buy an apartment with a low avgift [monthly fee] to lower our costs, but all of a sudden the avgift went up by 15 percent at our BRF [housing association], and then the electricity price went up 300 percent.”

“Are we stupid, that we are making such a bad choices?” she asked. “Because everything went up in a really short amount of time, and I don’t want to even talk about inflation.”

Gőbel suspects that foreigners from some countries may take greater financial risks than born and bred Swedes. 

“Someone born and raised in Stockholm probably leaves larger margins in their monthly budget than, for example, someone from Eastern Europe, who’ve grown up with inherently tighter budgets and often apply the same model to their lives in Sweden,” she said. “Which means they feel the effects of these financial decisions sooner or more intensely.”

What remedies are people taking? 

Gőbel and her husband have been trying to eat less expensive meat, buy less clothes, and have reduced their travelling and holidays. She is a freelancer and is considering going back to a 9-to-5 job. 

“We haven’t taken any drastic measures yet,” she said. “We’re not cutting back on stuff that the kids like – swimming lessons and stuff like that – until we absolutely have to.”

Matošina wants to renegotiate her mortgage with another bank. The rate she and her husband are paying Nordea is now close to 5 percent, but because they are in negative equity, she believes it is impossible right now to shift the mortgage over to a bank with better rates. 

“Banks don’t want to do business with us, so we are stuck with Nordea, who I think have one of the highest interest rates.”

Her husband is now considering selling a house he owns in Croatia to bring down their mortgage and take them out of negative equity so they are free to shop around for a better deal. 

Gőbel admitted she was “holding out for some relief, however naive that may be”. 

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Swedish inquiry calls for state-run digital ID and low-risk bank accounts

A Swedish government inquiry into the payment system has called for the state to launch its own digital ID and a new type of basic, low-risk bank account to help the estimated 1m people with no, or limited, access to digital payments.

Swedish inquiry calls for state-run digital ID and low-risk bank accounts

“Too many people are stuck outside the digital system,” Anna Kinberg Batra, the former Moderate Party leader who led the inquiry said as she delivered the conclusions of her more than two-year inquiry on Friday. “Privately-run banks own central parts of the system and the government needs to get more involved.” 

In the report, it notes that Sweden is one of only four EU states, alongside Cyprus, Greece, and Romania, which lacks a state-issued digital ID. 

Currently, BankID, which is issued by the major banks, dominates the e-ID landscape in Sweden, and even the main alternative, Freja e-ID, is owned by a private company.

The report calls on the government to either task a government agency to develop and run its own digital ID system, or to put out a tender for one which would be run by a private provider, but which meets government guarantees and requirements. 

The new digital ID system, it said, it should make it possible for foreigners currently excluded from BankID, such as refugees, foreign students, and people working on short-term contracts, to identify themselves and use digital payment systems. 

“For a state-run e-identification system to be able to provide an effective tool for financial inclusion it is important that there are no unnecessary obstacles for asylum seekers, foreign students, and guest workers, among others, to obtain a state-run e-identification.”

The report also calls for action to prevent foreigners living in Sweden from being deprived of their bank accounts or prevented from getting them in the first place because of regulations put in place to prevent money laundering and terror financing. 

It suggests pressuring banks in Sweden to offer so-called “low-risk accounts” with limited functions (such as, for example, limits on international payments).

“More people must be given access to bank accounts, through for example more effective surveillance and through banks using the possibilities in legislation to offer accounts with more limited functions (low risk accounts),” the report reads. 

As well as access to digital payment services, the inquiry also looked at whether it was important for Sweden to continue to use physical cash and coins. 

It concluded that it was important to continue to keep cash as part of the payments system, as otherwise Sweden would be vulnerable in a severe crisis or military attack. 

The report also calls for government agencies and pharmacies and shops selling goods deemed essential to life, to be required under law to accept cash payments. 

Finally, the report concludes that there is no need at present for the Riksbank to issue a so-called “digital krona”, a state-backed digital coin similar to Bitcoin, but it encouraged the central bank to continue monitoring the situation. 

“The Riksbank should continue to consider the issue,” Kinberg Batra told TT. “We have a high confidence in our digital payments, a krona is worth a krona and we have a guarantee on bank deposits for if anything happens to the banks, and banks are also heavily supervised under a rigorous regulatory framework.”