Economy For Members

How Norway's surprise interest rate hike affects you

Frazer Norwell
Frazer Norwell - [email protected]
How Norway's surprise interest rate hike affects you
Here's how the latest interest rate in Norway will affect you. Pictured is a pier in Tromsø Photo by Rebecca Walsh on Unsplash

Norway's central bank defied expectations in raising the key interest rate on Thursday. Here's what it could mean for you.


Norway's central bank surprised analysts when it announced that it would stick to its plan unveiled earlier this year and raised the key interest rate to 4.5 percent. 

The bank had previously said after its last hike in September that another increase would arrive in December.

However, analysts expected the bank to hold off from another raise due to developments in the economy. 

Homeowners and those with loans can expect their repayments to become more expensive from the New Year. Banks in Norway have to wait a few weeks until they are able to implement the new charges on variable-rate loans and mortgages. 

This means that some may manage to make it into February without seeing their monthly outgoings increase. Experts expect a mortgage rate peak of around 5.7 percent. 

Savers typically have to wait longer to see interest rates on deposits increase than they do for any money owed to the bank.  

It also means that the property market in Norway will see its slowdown continue. The effect is felt particularly strongly in the new build market. New projects have dropped by 63 percent compared to the same month last year and sales have dipped by 19 percent. 

"The situation is worsened by the interest rate hike, and the crisis becomes deeper and more serious. It is important that we quickly get a predictable and falling interest rate trend to get housing construction started," Lars Jacob Hiim from the home building association, Boligprodukterene, told business news site E24

High interest rates make new builds more expensive. The used home market is also affected as high interest rates make it harder to get a mortgage.

Those looking to sell can likely expect it to take longer to shift their homes, and they may even need to drop their prices as a result of the generally lower demand in the market. 


The good news for homeowners and those looking to buy and sell a home in Norway, the latest interest rate should at least represent the peak. Norges Bank has said it is unlikely to raise interest rates again. 

The bad news is that the central bank is unlikely to cut rates anytime soon.

"The forecast indicates that the policy rate will continue to lie around 4.5 percent until autumn 2024 before gradually moving down," bank governor Ida Wolden Bache said. 

Norway's krone has strengthened against the euro following the interest rate increase. It rose by around 16 øre against the euro. 

The interest rate increase may provide more green shoots for the Norwegian krone due to interest rate differentials.

Norway's krone strengthens when its key interest rate is higher than in other countries. This is because it makes the country more attractive to investors. 

"Norges Bank has placed more emphasis on the weak krone than soft macro data," Dane Cekov at bank Nordea told public broadcaster NRK. 

The stronger krone will affect the price of imported goods, inflation and the cost of travelling in and out of Norway if it strengthens more significantly in the longer term. 


The central bank has said that it raised the interest rate to try to curb inflation further. 

"We see that the economy is cooling down, but the price increase is still too high. An increase in interest rates now reduces the risk of price inflation remaining high for a long time. We will probably keep the policy rate at 4.5 per cent for quite some time to come," Bache said. 

Core inflation in Norway, which excludes energy costs, peaked at 7 percent in June. In November, core inflation was measured at 5.8 percent. Despite this being below the bank's forecast of 6.1 percent, inflation remains above the long-term target of 2 percent.

With this additional increase, perhaps consumers in Norway can look ahead to inflation coming down more rapidly than if the rate had remained unchanged.


Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.

Please log in to leave a comment.

See Also