Major Norwegian Banks Raise Mortgage Rates in Response to Central Bank Hike

Major Norwegian Banks Raise Mortgage Rates in Response to Central Bank Hike

Nordea and DNB Announce Rate Hikes

Two of Norway’s largest banks, Nordea and DNB, have revealed plans to increase their mortgage and deposit rates following a 0.25 percentage point rise in the country’s key policy rate by the Norges Bank. This move exemplifies a common trend among Norwegian banks to align their rates with those of the central bank. The revised rates will be effective from November 27, 2023.

Rate Changes in Detail

With the new adjustments, DNB’s optimal floating rate will be at 5.24%, intended primarily for customers buying their first home. Concurrently, the bank will set the interest rate on BSU deposits (a specific savings account for young people saving to buy a house) at 6.35%. All deposit rates will see an increase of 0.25 percentage points, except for current account rates, which will remain at zero. The new rates will be applicable from November 26, 2023, for existing loans and deposits.

Similarly, Nordea has also resolved to raise its loan and deposit rates. According to Randi Marjamaa, head of the personal market at Nordea Norway, the decision was a response to the Norges Bank’s rate hike on September 21.

Other Banks Follow Suit

Sparebanken Sør and Sparebanken Vest have also decided to raise their rates on mortgages and deposits by up to 0.25 percentage points. The new lending rates will come into effect from September 27, 2023, while changes to existing loans will be implemented from November 27, 2023.

Exceptions to the Trend

However, not all banks are following this trend. Sparebank1 Hallingdal Valdres has decided not to increase its rate. According to bank chief Knut Oscar Fleten, they aim to maintain a reasonable level on the interest rate and avoid squeezing their customers as much as possible. Despite the decision costing the bank millions of kroner, Fleten believes they have the capacity to absorb it.

Future Policy Rate Expectations

The Norges Bank has signaled that the key policy rate will likely be raised again in December and is expected to stabilize at 4.5% throughout 2024. The rate hikes are primarily due to inflation significantly surpassing the central bank’s target of 2%.