The Swedish Financial Supervisory Authority’s latest report on the banks’ mortgage margins shows that they are once again making more money on the mortgages. For you as a consumer, this means that the bargaining power increases. But how much money is really at stake? Is it worth the trouble?
In total, billions of kroner are at stake. According to our calculation (see fact box below), the big banks’ customers could earn over SEK 4 billion a year if they went to cheaper mortgage challengers or managed to negotiate down their interest rates to the cheapest niche bank’s average interest rate.
For the individual customer, this can mean many thousands of Swedish kroner in savings. With the mortgage challengers, pricing is usually transparent. What you see on their site when you enter your loan amount and the value of the home is the best interest rate you can get. An easy way to compare prices.
At the big banks, it is necessary to negotiate. Anyone who is otherwise an attractive customer finds it easier to bargain. It will be an advantage for those who collect many transactions with the bank and borrow large amounts (but with a reassuring distance to the value of the home). But how much can you manage to reduce your interest rate right now?
A recent example is the large bank customer who has a home in Stockholm valued at SEK 5.5 million with a mortgage of SEK 2.9 million. He was not happy with 4.53 percent in 3-month interest. “It can’t be pushed any further,” he was told by his banker.
He looked around for alternatives and requested his amortization basis. Shortly afterwards, he was called by a special department at the bank tasked with retaining customers who are switching banks, with an offer of 4.10 percent – a saving of SEK 1,000 a month.
Good pay for three minutes of work. And should it end up in you wanting to switch banks because the grass is greener on the other side anyway, it doesn’t have to be complicated. You can keep your salary account with the current bank and just move the mortgage.
In the video, you get three tips for how to best negotiate the interest rate!
So we have calculated the interest
We have calculated a weighted (taken into account the respective market share) average interest rate for three-month mortgages for the four major banks: 4.48 percent. We count on all of the major banks’ mortgage customers moving their loans to the niche bank with the lowest average interest rate. So the interest rate goes from 4.48 percent to 4.33 percent. Since the major banks have approximately 70 percent of the mortgage market, this corresponds to SEK 2,870 billion in mortgages.
Simplification in the calculation: we assume that all customers have a three-month interest rate and use that interest rate for the calculation, since we do not get to know from the banks exactly how their customers allocate their loans. However, we know that fixed interest rates with maturities longer than three months are very unpopular now. Few who refinance or take out new loans commit them at present.