According to OP, by the end of the year, interest rate protections will already benefit about a hundred thousand banks. According to Nordea, the increase in interest rates affects only half of the loan customers.
Finland according to the two largest banks, the strong rise in mortgage interest rates and other prices is still not much visible at the banks’ loan counters.
The payment difficulties of mortgage customers have not increased, and even the popularity of mortgage-free people has not increased.
The rise in both interest rates and energy prices seems to hit most households only with a delay. The length of the interest rate review period and fixed-term electricity contracts postpone problems.
“The repayment flexibility, which we have as an automatic feature of most mortgages, is used even less than before the corona crisis,” says the CEO of Nordea real estate credit bank Jussi Pajala.
He compare the current situation with the time before the pandemic, because at the beginning of the corona crisis, repayment holidays were actively offered in all banks and in the entire euro area to alleviate the effects of the sudden restrictions and the resulting increase in unemployment on the economy.
The situation is the same in cooperative banks as well. The demand for short-term leave has not increased, and so far no payment difficulties have arisen.
“Of course, people investigate, ask questions and think about alternatives”, the manager responsible for personal customer financing Fairy tale Nurmi says.
Bank managers also find good reasons for the calmness of the situation.
The most common reference interest rate for mortgages has risen rapidly in the fall. This week the interest rate already rose above 2.6 percent, but on Friday the interest rate dropped to 2.556 percent. The increase in the interest rate affects the interest paid on the loan only after the interest rate revision date.
The interest rate on loans tied to the annual Euribor rate is revised once a year.
“Euribor for the year rose above zero only in April, that is half a year ago. Therefore, for approximately half of the mortgage customers, the increase in the interest rate has not yet affected the loan interest rate at all,” says Nordean Pajala.
Same the phenomenon also applies to electricity contracts. Many consumers who use a lot of electricity have had a two-year fixed-term contract, and the increase in the price of electricity only hits when the contract expires.
“Provided that it has been purchased from a company that remains afloat,” says Pajala.
In the course of a year, three electricity sales companies have already stopped their operations due to a reserve crime.
OP’s According to Nurmen interest rate hedges already give many customers security.
“So far, around 46,000 customers benefit from the interest rate cap. At the end of the year, the number will rise to 100,000 customers,” says Nurmi.
A mortgage customer can protect himself against rising interest rates with, for example, an interest rate cap, an interest rate pipe or a fixed interest rate. Protection costs money, but even a year ago you could get protection quite cheaply, because the market did not expect interest rates to rise.
Banks price hedging products according to market interest rate swaps.
Nordic according to a study by About a third have some interest hedging product. The rest have savings and investments in case interest rates rise.
“You also have to take into account that only about a third of Finns have a home loan, and the sums for most of them are quite moderate. If 70 percent of those who have taken out a loan are prepared for a rise in interest rates, we generally have about ten percent of Finns for whom the rise in interest rates can be a more serious problem,” says Pajala.
The largest loans have typically accrued to families with children in growth centers who need a large apartment for their family. In large apartments, the cost of energy is also felt the most.
“According to experience, however, these households also have reasonably good buffers. The employment situation is still good,” says Pajala.
He thinks that the biggest problems will ultimately concern those living outside the growth centers, whose incomes may be lower.
“That’s why it’s good that when challenging months come, customers have the opportunity to use the mortgage repayment holiday. It’s a backup valve that brings flexibility to everyday life when needed,” says Pajala.
Fifties the observer may now wonder why people 10–20 years younger feel anxious about even two percent interest rates. However, according to the Financial Supervisory Authority’s instructions, the banks have had to test the customers’ ability to pay with a six percent interest rate assumption and a maximum loan period of 25 years.
According to OP’s Nurmi, the stress tests have been adhered to and the payment reserve has been assessed so that the money is sufficient for basic life expenses.
“But when you are used to being paid according to a lower interest rate, adapting to higher interest rates is not necessarily easy. Some have saved, but some have used the benefit of low interest rates for new expenses,” he says.
Pajalan according to a large proportion of customers do not remember a time when interest rates were not negative. That’s why it seems strange now that you have to pay more than the margin for the loan.
“Banks now have a big task of educating customers, so that the customer understands what the interest rate is and how to prepare for a rise in the interest rate,” he says.
Mixed According to Nurmi and Pajala, it’s pointless to expect that the interest rate will fall, at least in the near future. The period of negative interest rates that lasted more than six years was a unique and abnormal period in economic history.
“Let’s start with the concept of interest: one of the normal laws of the economy is that money has a price. Our economists’ view is that after a year we will be roughly at the 2.5 percent level.”
OP’s economists have also predicted, according to Nurmi, that the interest rate would settle at a level of 2–2.5 percent in the slightly longer term.
However, there is great uncertainty, and expectations on the interest rate market now fluctuate very strongly from day to day, so another kind of development is also possible.
#Banks #rise #interest #energy #costs #hitting #large #proportion #households #delay #Shortterm #leave #corona #crisis
