Norway’s central bank, Norges Bank, has decided to increase the policy interest rate from 0.5 percent to 0.75 percent.
The bank also announced there would be seven new interest rate hikes by the end of 2023. The next rate increase is set to happen in June.
“As we now assess the outlook and the risk picture, the key policy rate will most likely be raised further in June,” Ida Wolden Bache, governor of Norway’s central bank, Norges Bank, said in a statement.
The policy rate going up means more expensive loans and mortgages for consumers. For every quarter a percentage point, the interest rate on your bank loan rises, your annual interest costs will increase by 2,500 kroner for every million you owe.
An interest rate of 0.75 percent means yearly repayments of 7,500 kroner per million of debt. For example, if you have a loan or mortgage of four million, the annual interest costs will be around 30,000 kroner per year.
Banks and mortgage providers have a notice period of six weeks, meaning repayments won’t become more expensive until towards the end of next month at the earliest. When banks do raise their rates, they can choose to do so above the policy rate.
One positive of rising interest rates is that it can slow down the growth of house prices as the purchasing power of the public is reduced. So while not great if you are looking to sell up soon, it does benefit those priced out of the housing market.
“This is good because it helps to curb the unhealthy house price growth that has been triggered by historically low-interest rates and fewer consumer opportunities during the pandemic,” Carl O. Geving from the Norwegian Real Estate Association explained to financial media publication E24.
Norges Bank predicted that house prices in Norway would rise by around 4.4 percent in 2022. Last year, house prices increased by 9.1 percent.