For heavily indebted Swedish households, 2023 has meant greatly increased costs as a result of record high mortgage interest rates.
In November, the Riksbank chose to leave the policy rate unchanged at 4 percent. Before that, the Swedish central bank had raised the interest rate eight meetings in a row, since April 2022, in an attempt to curb inflation. This development, in turn, has caused mortgage interest rates to go from an average of 1.5 percent to just over 5 percent.
Respite for households
But ahead of 2024, households can be optimistic, according to online bank Nordnet’s savings economist Frida Bratt.
– You have to keep in the back of your mind that the worst is behind us, she says.
– But if you expect declines to 1-1.5 percent, the hopes are way too high. We will get slightly lower interest rates, but how much lower remains to be seen.
Robert Boije, chief economist at state-owned bank SBAB, assesses that households can count on a certain amount of breathing space next year.
– There are many indications that inflation will drop to the Riksbank’s target of two percent and then they can start lowering the policy rate, and then the variable mortgage rates will also drop, he says.
Pointing in the right direction
Most analysts expect the key interest rate to begin to be lowered sometime during the summer of 2024. Both the market and the economists of the major banks expect that it will then go down relatively quickly.
Many factors point in the right direction for next year, according to Robert Boije.
– Fuel prices are falling sharply, as are electricity prices, which are strongly inflationary, and although they may rise somewhat during the winter, prices have been significantly lower this year compared to last year. Global food prices are also falling.
– As a mortgage holder, I think you should go into next year with some confidence that we will see falling mortgage interest rates in the second half of 2024, says Boije.
He is supported by Frida Bratt.
– I think the Riksbank can lower the interest rate next year, but it is uncertain whether there will be one, two or three reductions. Total declines of 50 or 75 points can possibly be expected, but not more than that. Then you will be disappointed, she says.
Stoves are available
Both want to put in a firecracker at the same time.
– All forecasts are based on inflation continuing to fall as expected. But if something stands in the way of that, that plan will change, says Frida Bratt.
– There are geopolitical foci of concern – such as now in the Middle East – which can inflate and have effects on commodity prices, especially the price of oil, and thus affect inflation negatively. Most things indicate that the war between Israel and Hamas is sticking to the area, and economically the spread has been limited, she continues.
– In recent years, we have seen several such unforeseen geopolitical events: the pandemic, the war in Ukraine, and now the war in Gaza, says Robert Boije.