Norwegian banks in hot water for time it takes to increase savings interest
Banks typically wait 34 days to raise interest rates on savings after a key policy rate hike, compared to just 4 when increasing the rate for interest owed, according to a new analysis from Norway's Consumer Council.
The last two years have seen 13 interest rate rises in Norway. However, while lenders have quickly adjusted rates for money owed, they have come under fire for the time it takes them to pass on the benefits of high interest rates to savers.
It takes banks around eight times as long to increase the rates for savers as it does for the rates for those with outstanding loans and mortgages, according to an analysis from the Norwegian Consumer Council.
"The banks milk the deposit customers. The profits the banks get from high lending rates and low deposit rates cause deficits in the household budgets of many families in Norway," Inger Lise Blyverket, director of the consumer council, told Norwegian newswire NTB.
Banks typically announce interest rate increases on mortgages and loans four days after the central bank announcement. Meanwhile, it takes them 34 days to announce a hike in interest it will pay out to savers.
READ ALSO: What you need to know about Norway's consumer rights watchdog
Furthermore, six out of ten banks in Norway adopt a lower interest rate increase on savings than the policy rate. This means that those saving with the majority of Norwegian banks miss out on a major benefit of rising interest rates.
"As a customer, you would do well to react just as strongly to the poor terms on bank deposits as on mortgages. Use your consumer power, contact the bank and demand better conditions. If you get a negative answer, you should consider switching banks. Moving bank deposits is also easier than mortgages," Blyverket said.
Finans Norge, the interest organisation for Norway's banks, has said that banks' profitability was weakened by increased write-down on loans and a drop in the deposit margin due to the pandemic and historically low-interest rates in 2020 and 2021.
"Going forward, market players and authorities expect that the banks' profitability will fall as loan losses increase, cost growth accelerates, and customers eat away at deposits. Eating away at deposits can increase competition for deposits and thus deposit interest rates," Jan Erik Fåne, communications director for the organisation, said.
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The last two years have seen 13 interest rate rises in Norway. However, while lenders have quickly adjusted rates for money owed, they have come under fire for the time it takes them to pass on the benefits of high interest rates to savers.
It takes banks around eight times as long to increase the rates for savers as it does for the rates for those with outstanding loans and mortgages, according to an analysis from the Norwegian Consumer Council.
"The banks milk the deposit customers. The profits the banks get from high lending rates and low deposit rates cause deficits in the household budgets of many families in Norway," Inger Lise Blyverket, director of the consumer council, told Norwegian newswire NTB.
Banks typically announce interest rate increases on mortgages and loans four days after the central bank announcement. Meanwhile, it takes them 34 days to announce a hike in interest it will pay out to savers.
READ ALSO: What you need to know about Norway's consumer rights watchdog
Furthermore, six out of ten banks in Norway adopt a lower interest rate increase on savings than the policy rate. This means that those saving with the majority of Norwegian banks miss out on a major benefit of rising interest rates.
"As a customer, you would do well to react just as strongly to the poor terms on bank deposits as on mortgages. Use your consumer power, contact the bank and demand better conditions. If you get a negative answer, you should consider switching banks. Moving bank deposits is also easier than mortgages," Blyverket said.
Finans Norge, the interest organisation for Norway's banks, has said that banks' profitability was weakened by increased write-down on loans and a drop in the deposit margin due to the pandemic and historically low-interest rates in 2020 and 2021.
"Going forward, market players and authorities expect that the banks' profitability will fall as loan losses increase, cost growth accelerates, and customers eat away at deposits. Eating away at deposits can increase competition for deposits and thus deposit interest rates," Jan Erik Fåne, communications director for the organisation, said.
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