On Thursday, the Swedish Central Bank will announce a new interest rate decision. The stall tip from most economists, including those at all major banks, is that the repo rate will be cut by double the speed compared to previous cuts this year. That is, 0.50 percentage points to 2.75 percent.
Inflation is currently gone and the economy is struggling. It is therefore set up for the Swedish Central Bank to make an extra large interest rate cut, reason most assessors.
A half percent lower Riksbank interest rate will result in banks largely following suit with the variable mortgage interest rate to the same extent. For a three million kronor loan, this means 1,250 kronor lower interest per month (before tax deduction), around 900 kronor with the tax effect included.
More next year
And more interest rate cuts are expected next year, at least as much, when inflation is expected to continue to fall further and thus save another thousand kronor for heavily indebted households, according to the collective economic chorus.
The changes will take effect almost immediately for those with variable mortgage interest rates (three-month rate), and among new borrowers, an overwhelming majority choose just that, according to Robert Boije, chief economist at state-owned bank SBAB.
Variable interest is historically cheapest, while binding often comes with an extra premium. But for those who want security, binding can be good in the current situation.
If you want to bind, it doesn't cost much more right now, he says.
The caveats
And there are caveats in the interest rate forecasts going forward. Donald Trump's victory in the American presidential election is likely to drive up longer-term bond yields. The policy he has flagged is expected to boost inflation, reason Boije and several other economists.
A higher inflation affects the Fed's (the US central bank) interest rate path. And it spreads to Europe, says Boije.
By 2025, inflation will be a question again, says Danske Bank's analyst Maria Landeborn.
SEB's chief economist Jens Magnusson notes that the Swedish krona continues to weaken clearly in the wake of Trump's election victory. Bad news for those who want lower Swedish interest rates. He does not believe, however, that it will change the Swedish Central Bank's interest rate decision to be announced on Thursday.
But it's a caveat, he says.
It's leaning towards 50 points, but it's far from obvious, says Robert Boije.
A loan of one million kronor would change like this if the interest rate is cut by one percentage point:
833 kronor lower mortgage cost per month.
580 kronor lower interest cost per month after the tax deduction.
