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Norwegian lenders raise interest rates after central bank hike

After Norway’s central bank, Norges Bank, raised the key interest rate, mortgage providers have followed suit, with some even raising their monthly charges above the key rate.

Norwegian lenders raise interest rates after central bank hike
Banks didn't wait around to announce their rises. Photo by Tierra Mallorca on Unsplash

Long expected interest rate rises in Norway have finally arrived after months of forewarning from financial institutes.

The key rate was raised to 0.25 percent as part of Norges Bank’s strategy to increase interest to 1.75 percent by 2024.

The most immediate and noticeable impact of this is lenders raising their interest rates to match the central bank’s.

While 0.25 percent may seem like a marginal rise on the surface, it could have a more significant impact on your wallet than you think.

For example, if you have a loan or mortgage of around four million kroner, you will pay approximately 8,000 kroner per year more in repayments after the rise.

EXPLAINED: What rising interest rates in Norway mean for you

It didn’t take long for lenders to say they would raise their rates, and several of Norway’s leading mortgage providers including DNB, Nordea, Sparebank 1 SMN, Danske Bank, and Sparebanken Sogn og Fjordane did so almost immediately after the key interest rate raise was announced.

“When Norges Bank now raises the key interest rate, we are leaving a historic period of zero interest rates behind us. We are moving towards normalisation. Even after this adjustment, our mortgage customers will still have a very low interest rate,” Ingjerd Blekeli Spiten, executive vice president for retail at DNB, said of the rate rise.

Most banks will begin charging new customers higher interest rates from the end of this month. At the same time, some of the country’s biggest lenders said existing customers can expect higher repayments from November.

Some banks such as Danske Bank raised their interest higher than Norge Bank’s rise. For example, Danske Bank is to increase lending rates by 0.30 percent.

“When Norges Bank raises the key interest rate, we must consider the changes this entails and adapt to the market situation. With this interest rate adjustment, (we) will continue to be very competitive in the market. This is something we will continue with,” Aleksander Dahl, head of the retail market at Danske Bank Norge, said in a statement.

Even with interest rates going up, it is still possible to avoid them or pay lower than the key interest rate if you contact your bank and negotiate the interest they charge on any loans and repayments with them, you could also explore the possibility of a fixed rate mortgage, which may be more expensive initially but will protect you against future rises.

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Key mistakes to avoid when bidding on a house in Norway 

Norway's house bidding process is equally stressful and confusing, but before putting in an offer, you should make sure you aren't making any of these costly mistakes. 

Key mistakes to avoid when bidding on a house in Norway 

Buying a house is normally stressful enough, whether it’s getting a mortgage in place, going to dozens of viewings or spending hours going through listings. 

In Norway, the process is further complicated by the house bidding process, which you will have to go through when buying most properties today.

Additionally, you could make several mistakes that could make the process harder or cost you dearly. 

READ ALSO: 

Not having financing in place

Before you can bid on a property, you need to visit the bank to ensure financing for your purchase. If you are taking out a mortgage on the house, you will need to make sure you know the set limit the bank will allow to borrow. 

When you make a bid, the estate agent will contact the bank to ensure that you have the financial arrangements. If you do not have enough money or the mortgage your bank agreed on doesn’t cover the cost, your bid will be rebuffed. 

Therefore it is crucial to know your financial limits when entering bidding rounds to avoid any disappointments. 

Making a bid on a house you aren’t sure about

You should be absolutely sure that you could see yourself living in a property when you bid on it. This is because bids in Norway are legally binding, meaning that even if you put in a speculative bid and it’s accepted, you won’t be able to back out.

This means that you should avoid putting in any offers on homes you aren’t 100 percent sure about.

So while you may be in a rush to get on the property ladder or take a step up, patience will prevail over diving in headfirst. 

Forgetting to do proper research

The devil is always in the detail, and as dull as it may be, you should always read the small print to avoid any nasty shocks. 

This is especially important when buying apartments in Oslo and other cities where you will likely encounter housing associations where residents will be expected to pay various fees or contribute to the upkeep of the block. 

“For instance, if they are planning to replace the roof of the block the next year, you will read about it in the sales documents. It is important to consider whether you can afford a property also after potential add-ons,” Trine Dahl-Pettersen, real estate agent at Eindom 1, explained to The Local

Reading the small print isn’t the only place where research pays off. For example, one reader who has bought a house in Norway pointed out that finding a place that needs a little bit of work can help you avoid intense bidding wars, and locals tend to want a ready-made home to move into. 

“Finding a property that won’t go sky high over the asking price when bidding can be challenging. However, I quickly noticed that Norwegians are not afraid to bid high for a ready-to-go home,” Scott told The Local of his experiences buying in Bergen. 

“If you are comfortable doing some work on it, you can find a much better deal, maybe even under the asking price,” he added.

Therefore, market research can help prevent you from paying over the odds. 

Making more than one bid at a time

Unfortunately, putting plenty of bids out and seeing which offers stick could be a lot more disastrous than you may think. 

As mentioned earlier, bids in Norway are legally binding. Meaning that if you have two bids accepted at the same time, you will be legally obligated to purchase both of them.

Not having BankID

Despite the bidding process being done over the phone, there are still some hoops to jump through. 

You’ll need to have a Norwegian Bank ID available for the bidding process, as it is needed to confirm your identity when sending your bids. 

Without this, you won’t be able to lodge any offers. 

In addition to bank ID, you will need a Norwegian identification number (D-number/Personnummer) to hand. 

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