The time when it was extremely cheap to borrow money no longer exists. For those who entered the housing market around 2015, the difference is big. Although it was a higher level for a short period a couple of years ago.
Another step towards higher interest rates came on Wednesday when the Riksbank raised the key interest rate to two percent, which pushes up variable mortgage rates. But it won't end there. If you look at the banks' forecasts for mortgage rates in the coming years, the assessments are over three percent - and in some cases up to four percent.
It is very different from the seven years when the Riksbank kept the interest rate at zero and below zero. In many cases it was then possible to get mortgage interest rates of around one percent.
- We expect that the mortgage interest rate in the future will average around 3.5 to 4 percent, a little depending on the commitment period, says Robert Boije, Chief Economist at SBAB.
By way of comparison, the variable mortgage interest rate averaged 3.2 percent and that with a five-year fixed term of 4.1 percent during the period 1998–2025, according to SBAB.
But during the 2000s, even higher levels were occasionally seen, when mortgage interest rates of six percent occurred. If you look even further back, interest rates have been over ten percent and for a short time over twenty percent.
For those who have a loan of two million kroner, a one percent higher interest rate means that the monthly cost increases by roughly one thousand Swedish kroner, roughly calculated.
- The future is uncertain. But as long as current inflation targets remain and the public finances are kept in good condition, there is no reason to believe that interest rates would move towards high levels, says Robert Boije.
He does not think it is that likely with levels of eight to ten percent as long as Sweden has an inflation target of two percent.
- On the other hand, six percent is in line with the so-called discount rate that many banks today use when credit checking mortgages. That the interest rate in the event of high inflation may rise to that level or perhaps a little more cannot be ruled out, says Robert Boije.
SEB's chief economist Jens Magnusson also expects that the higher levels will persist.
- We will hardly go back to when we had long and short interest rates that were around zero and you could get a mortgage for one percent or thereabouts, he notes.
He believes that there was a clear change from 2022 when inflation rose and the Riksbank again raised the interest rate.
- Suddenly, mortgages cost between five and six percent, instead of the one or two that many were used to. So it was clear that it was a shock, says Jens Magnusson.
He sees several explanations for continued higher levels.
- Now we have a different situation with large debts. Both private and above all in many states at the same time that some prices are quite inflated, says Jens Magnusson.
However, Jens Magnusson sees no major risk that it would go over eight percent.
- As long as we keep today's inflation target and have well-managed public finances, that risk should be small, he says.
- If interest rates are to go up to eight, ten percent, then a new rise in inflation similar to the one we had four or five years ago is probably required. Then the central banks may have to raise interest rates significantly and then the long-term interest rates may follow, says Jens Magnusson.
How then should one think when higher levels are in sight?
- You have to include it in your planning when you calculate your accommodation, so that you are realistic. It's sad, but important, says Ingela Gabrielsson, independent private economist, who also answers reader questions about private finances in DN.
Ingela Gabrielsson has her own experience of higher interest rates. When the private economist bought her villa in the early 1990s, she received fourteen percent mortgage interest.
- And it was good then, she remembers.
It must be said that it is not comparable to today, because there were different deduction rules then.
Her advice to anyone who is faced with changing homes or buying their first home is to be prepared for higher costs.
- That you don't close your eyes to it. You may have seen the fantastic home and would like to be able to buy. But there may be more fantastic homes, says Ingela Gabrielsson.
- And you must not live to death. It's not fun, she continues.
For those who are rescheduling their loans, it is good to look at the household's margins.
- If you think that interest rates will go up, you can consider tying up a portion to know what your costs are, says Ingela Gabrielsson.
- You can also think about whether you have the mortgages correctly positioned or whether they should be moved to get better terms. You can always ask your mortgage lender: what is the best you can offer me? And try to negotiate your interest rate, she advises.
Read more:
Five Swedes: This is how we think about mortgage interest
After the increase – that's how much more expensive your mortgage will be
Hidden factor can contribute to the housing price rally
