What has happened?
Sweden's central bank, the Riksbank, announced on September 23rd that it was cutting the key interest rate by 0.25 percentage points to 1.75 percent.
One knock on effect of this is the price that long-term Swedish market rates (the interest rate that market participants are prepared to pay for various types of credit) went up. This, in turn, increases the cost for banks to finance long-term mortgages and pushes up the interest rate on fixed-term mortgages with long terms.
That has left some Swedish mortgage-holders to wonder whether now could be the right time to opt for a fixed-term mortgage, before they increase even further.
So... should I switch?
Christina Sahlberg, saving economist at comparison site Compricer, warns that it is extremely difficult to know exactly when to opt for a fixed-term mortgage. She added, however, that it's not to late to do it now.
"The train hasn't left the station, as always you should decide based on your own circumstances," she said.
READ ALSO: Why are variable rate mortgages so popular in Sweden?
A comparison of snitträntor, the average interest rates customers at Swedish banks received in August, shows that the gap between fixed-term and variable rates was relatively small.
Danske Bank offered the lowest variable rate among the major banks at 2.73 percent. Those opting for a fixed-term two year rate paid only slightly more, at 2.86 percent.
"If I'm going to be living in the same place and think it's nice to know what I'm going to be paying each month then it's not the wrong decision to opt for a fixed rate now," Sahlberg said, while adding that variable rates have often been a better deal than fixed rates historically.
How has this affected the property market?
Things have been relatively stagnant on the property market over the past few months, with prices dropping by 0.3 percent on average in Sweden last month, according to statistics from estate agent organisation Svensk mäklarstatistik.
Robert Boije from state mortgage bank SBAB does not believe the newest rate cut will have any significant effect on prices.
"I don't think this will get things going on the property market," he said. "25 percentage points will have an extremely marginal effect on the market, possibly it will create a certain level of security for households."
Comments (1)