Norges Bank continues to raise interest rates quickly to force inflation down to 2 percent. The latest inflation figures for August show that core inflation, which is the increase in prices excluding energy and taxes, is 6.3 per cent. This is a slight decrease of 0.1 percentage point from when Statistics Norway measured the twelve-month growth in July. – Today’s figures were positive in the sense that we didn’t get any more surprises on the upside, says chief economist Kjersti Haugland at DNB Markets. Chief economist Kjersti Haugland in DNB Markets. Photo: Alf Simensen / news In the last year, inflation has proved to be stronger than Norges Bank and most economists had expected, so that the announced interest rate peak has been adjusted upwards several times. – How should people deal with the fact that they have been left behind? – It is a sign. If it continues, we can think that the interest rate will be higher than we thought, says NHH professor Ola H. Grytten. High interest rates can last for years The figures so far tell Haugland that inflation is so far away from Norges Bank’s target that both one and two interest rate increases from the current level of 4 per cent are possible beyond the autumn. – The interest rate will rise with a very high degree of certainty next week. It does not remove the risk that we may have another increase beyond the autumn, but that risk decreases with a positive number, she says. After the interest rate meeting on Thursday next week, the key interest rate will apparently be 4.25 per cent. This will result in a mortgage interest rate well into the 5s for Norwegians with loans. In the period 2011–2022, the mortgage interest rate for Norwegians was mostly below 3 per cent. Policy rate in percent The policy rate is set eight times a year by Norges Bank. The policy interest rate governs the interest rates in the banks, and affects your housing costs. The aim of raising the interest rate is for the high prices to come down again. The forecast tells us how Norges Bank thinks interest rates will develop in the future. Read more about sources and reservations here. A higher key interest rate means increased expenses if you have a mortgage 2021 2022 2023 2024 2025 2026 Forecast Norges bank Haugland expects the first interest rate cut to come before Christmas next year, and then the key interest rate will be stepped down to 3.25 per cent until 2026. This will therefore give a mortgage interest rates above 4 per cent well into the 20s. Grytten also believes that the mortgage interest rate will remain above 4 to 4.5 per cent for a couple of three years, and that the horse cure to bring down inflation will last for a while. – I think the mortgage interest rate will reach a peak of 5.5 to 6 per cent, and then I think it will be there longer than many people think. I don’t think we will return to the interest rate level where we were, he says. Economics professor Ola Honningdal Grytten at NHH. Photo: Marit Hommedal / NTB – Do you think it will go well? – I think so. It is still not a high interest rate. Norges Bank does not believe that inflation will come down to 2 per cent before 2026. If inflation is the same as the interest rate, then inflation eats up parts of the loan, and wage growth also contributes, says Grytten. Interest calculator The calculator uses the formula for annuity loans to calculate your monthly costs. Nominal interest is used here. This means that there will be an additional transaction fee which will vary from bank to bank. Today’s interest rate is taken from DNB’s mortgage interest rate for young people, and different banks will have different interest rates. The figures given here will therefore be approximate for you. Monthly expenses are interest and repayments combined. Read more about sources and reservations here. See how much you have to pay if the interest rate increases. The rest of the world can decide Both Haugland and Grytten believe that the interest rate cannot be much higher than the current level, and point out that the uncertainty is about how long the interest rate must be high in order to reduce price inflation. – It depends on the development in the Norwegian economy. If, contrary to conjecture, we should have a hard landing, the turnaround in interest rates will come earlier. Another uncertainty is abroad. If the interest rate peak stays longer in the US and Europe, it will lead to Norwegian interest rates being high for a long time, says Haugland. – Are the economists more certain now about what may happen in the future than a year ago, Grytten? – Yes. We are safer now. But we are still unsure. We do not know what is happening in Ukraine, and we do not know exactly what is happening with the krone exchange rate, so we are not sure, but we know more than we knew then, says the NHH professor.
ttn-69
Stubborn inflation – expect mortgage interest rates above 4 percent until 2026 – news Norway – Overview of news from different parts of the country
