In October 2021, Tatjana Solberg (43) chose to take an unusual interest rate move.
– Prices started to rise, and I felt that I wanted to have better control over the expenses that I could control. At that time, the interest rate was quite low, so I found that I wanted to tie the interest rate, she tells TV 2.
The number of Norwegians who at the end of 2021 had a fixed rate mortgage was only 6.4 per cent, according to Statistics Norway.
SECURED: Tatjana Solberg is happy that she secured a low interest rate on the mortgage. Photo: Private
Solberg says that several people warned her against the election, but she herself does not regret it for a second.
Save every month
– I am very glad that I did it. I didn’t want to risk a big interest rate increase in the next few years, even though many might think it wasn’t profitable, she says.
Solberg has previously commented on fixed interest in E24.
The Bergen resident has a loan of three million kroner. With the fixed-rate agreement she signed in 2021, she now has an interest rate of 2.2 per cent. In comparison, the mortgage interest rate at several banks is now around four percent.
In just over a year, Solberg has saved approximately NOK 20,000 after tax.
The sum only contains interest costs, and the calculation is based on the fact that the mortgage interest rate has increased in line with the key interest rate.
– It’s almost as if I regret that I only tied up the annuity for five years and not ten years, she says.
According to consumer economist at Danske Bank, Thea Olsen, the sum Solberg saves can increase considerably in the next year.
– If Solberg initially had a mortgage interest rate of 4.40 per cent throughout 2023, she will have an annual saving of around NOK 50,000, after tax.
Herd mentality
One in six Norwegians regret not having tied the annuity, shows a new survey from Danske Bank.
– Norwegians’ view of fixed interest largely revolves around whether it is profitable or not. My impression is that few people think about predictability when they make choices related to interest rates, says Olsen.
SURPRISED: Thea Olsen, Consumer Economist at Danske Bank, is surprised that not more chose to tie the interest rate when it was historically low, Photo: Jonas Been Henriksen / TV 2
In autumn 2020, you could get a fixed interest rate of 1.88 per cent, which was historically low.
– It surprises me that not more people chose to fix the interest rate at this time, but then again I think most people get hung up on the fact that historically it has been profitable to have a floating interest rate.
She says that many Norwegians have a kind of herd mentality when it comes to personal finances.
– I think many people do what everyone else does, instead of thinking twice and assessing what is smart in terms of their own finances, says Olsen.
The fixed interest rate agreements are normally higher than the floating interest rate. Olsen believes this can be frightening for many.
FEW NORDMEN: Only 6.4 per cent of Norwegians had a fixed interest rate on their mortgage at the end of 2021. That is significantly fewer than our neighboring countries. Photo: Ingvild Gjerdsjo
– A floating interest rate is fine if you know you have the finances to handle any interest rate increases, but if you have a lot of expenses and need predictability in your finances, it may make sense to tie the interest rate.
May require money
Olsen adds that there are both advantages and disadvantages to signing a fixed interest rate agreement.
– If you commit to the interest rate, you also commit to the bank. This means that if you have tied the interest rate to 2.2 per cent in a bank for five years, and you want out of the agreement after two years, the bank will demand compensation for the loss if, for example, the fixed interest rate is now 1.9 per cent.
This is because the bank will then lose money if they were to loan the money on to another customer. This is called a premium, explains the consumer economist.
– On the other hand, it may be that the fixed interest rate has become higher than the fixed interest rate you have. Then it is you who can demand money from the bank by breaking the agreement. This is called an underpayment.
Olsen adds that it is possible to bind parts of the loan.
– Then you will achieve a great degree of flexibility on parts of the loan, while the rest is secured via a fixed interest rate, she says.
– Brutal reminder
Chief economist at Danske Bank, Frank Jullum, says that Norwegians’ attitude to fixed interest rates differs from the rest of the world, especially our neighboring countries.
– Norwegians are in a special class, and stand out with an insanely high proportion of floating interest rates, says Jullum.
EXCITED: Frank Jullum, chief economist at Danske Bank, is excited about whether Norwegians’ attitudes to fixed interest rates will change when inflation subsides.
He says that 45 per cent of Denmark’s population has a binding interest rate agreement. In Sweden, the proportion is around 30-40 per cent.
– It is worth mentioning that the proportion with fixed interest rates is also falling here. This is due to a very low interest rate over time. Fewer people are willing to pay for the insurance that binds the interest, says Jullum.
He is anxious to see if this mentality will change after the significant interest rate hikes recently.
– We have now received a brutal reminder that fixed interest rates can pay off. Nevertheless, it is difficult to say what kind of normal we will return to when inflation subsides, he says.
