Did you breathe a little heavily when you read the headline? Then you are probably not alone. 2022 was characterized by many, and relatively large, interest rate increases from Norges Bank. In total, we were served six interest rate hikes, three of which were double. In one year, the key interest rate went from 0.5 per cent to 2.75 per cent. But all along there has been a melody in the background, which has sung of better times for people with loans. Soon it will be over, just a little bit more. At the interest rate meeting in December, central bank governor Ida Wolden Bache said that monetary policy, i.e. interest rate hikes, has started to have a tightening effect – and that we have not yet seen the full effect. In the interest rate forecast that the central bank presented at the same meeting, it indicated an interest rate peak of 3 per cent – i.e. only one more rate hike. 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 policy rate means increased expenses if you have a mortgage Tighter tones But at the meeting in January, a month and a half later, we could already sense more tightening tones. The next rate hike was more or less set to come in March. If you haven’t yet realized the goal of all these interest rate hikes, then it is to bring down the galloping inflation. At the same time, Norges Bank is in a demanding balance, where they do not want to slow down growth in the economy any more than is necessary in the war against inflation. And that war is far from won, to put it mildly. In January, price growth came in at 7 (!) percent, and picked up again after falling the two months before. Then I use the opportunity to remind you that Norges Bank’s aim is for inflation, i.e. price growth, to be around 2 per cent over time. We are now miles over. 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. Tougher than one might think. Therefore, there are probably many now who hope that the price increase will soon come down. But how likely is that? Because it is tougher than one would think, to stifle price growth. Norges Bank was also open about it in December, when they described what it was like to navigate such unfamiliar waters. It is approximately 40 years since we had high price growth in Norway. And notice this sentence in the report: “In recent times, we have little experience with how price formation can change when inflation is high and inflation expectations are rising.” In other words; because Norges Bank has never been in a comparable situation before – they are far from certain that price growth will come down to where they think. Much is going up And price growth is not the only thing that is pulling Norges Bank in the direction of more interest rate hikes. In a few weeks, the bank will present a new interest rate forecast, and will most likely serve up a new interest rate hike at the same time. There, Wolden Bache will probably show that the Norwegian economy has fared surprisingly well through the winter, and that the figures for both house prices, growth and trade have been better than feared. House prices showed an increase of 1.5 per cent in February, a sign that households are better equipped to cope with interest rate increases than Norges Bank previously imagined. In January, there was also a softening of the housing loan regulations, which has probably contributed to keeping things warm in the housing market. Recent figures for unemployment show that the labor market is also doing very well, where we are at historically strong levels. As long as the vast majority of people have a job to go to, Norges Bank can safely tighten the interest rate screw a little more. The number could be four But where do we end up? Several of the brokerage houses believe in three more interest rate hikes before the summer, some even predict a further four. Then suddenly we are at a mortgage interest rate of well over 5 per cent, a level we have not been close to since the financial crisis in 2008. It is not just Norges Bank that is unable to stem price growth. Nordea Markets calls inflation a “Gordian knot” for central banks and financial markets both in Europe and the US. The European Central Bank ECB will probably raise interest rates to at least 4 percent during the year, while the American Central Bank Fed is talking about expecting higher interest rates for longer. In the US, the key interest rate can reach 5.5 per cent – perhaps 6 per cent. At least someone has it worse than us, you might be thinking now. But in the US, they don’t do it like here, with floating interest rates on the mortgage. No, there they insure themselves against rising interest rates by tying the interest rate. Maybe that’s what we should have done last year.
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We can get many more interest rate hikes – Statement
