More expensive food, skyrocketing electricity bills and increased prices for petrol and diesel. The last few years have indeed presented several economic challenges, both in the world in general and in Sweden specifically.
The Swedish inflation, which according to the CPI measure landed at a whopping 12.3 percent in December 2022 – which was then the highest figure since the 1980s, has also meant that the Riksbank has been forced to raise the key interest rate on several occasions.
– Inflation is the percentage change in the consumer price index, abbreviated CPI. The index consists of a basket of goods and services that is representative of household consumption, has Roine Vestmandocent in economics at Stockholm University, previously told News24.
Source: The expert answers: What is inflation and how are Swedes affected?
With a higher policy interest rate, the banks’ mortgage interest rates have also gone up significantly, which has meant that many Swedish households have struggled to get their finances together.
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Photo: Magnus Lejhall/TTMany pensioners are going backwards financially
One group that, like many others, has had to turn the tables lately are seniors who have retired. Recently, SPF Seniors and SKPF Pensioners raised the alarm that pensioners are losing SEK 2,705 a month.
– The pension system is not delivering as it should. The idea is that the general pension should give us pensioners financial security, but that is not the case. Today, most people are completely dependent on occupational pensions and other income to be able to cover the most necessary costs, have Liza di Paolo-Sandbergunion chairman at SKPF Pensionärnerna, previously told Nyheter24.
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Photo: Fredrik Sandberg/TT
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Therefore, “senior loans” received criticism
A few years ago, many banks and insurance companies offered so-called “senior loans” to older individuals, but nowadays these cannot be taken out.
– The so-called senior loans have been discussed and criticized because the interest rates are high, and this has contributed to the fact that the demand for that type of loan is simply no longer that great, explains Frida Brattsavings economist at Nordnet Bank, for Nyheter24.
Instead, there is now a so-called capital release credit.
– A capital release credit is the same as a senior loan, that is, you “get rid” of a kind of advance on the value of the home. But as I said, the interest cost is often high and it can be expensive in the end, says Bratt.
Frida Bratt. Photo: Press image/Nordnet Bank
Bratt further explains:
– The interest cost is not paid from your pension but with borrowed money, either as part of the loan or when the home is then sold. The interest is then continuously added to the debt, so the debt increases all the time with the term of the loan. The debt thus increases quite quickly, and the interest rates can be high, as I said. The increase in debt could have consequences for the future death residence, especially if the property’s value were to develop weakly. It can affect survivors.
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Photo: Izabelle Nordfjell/TT
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Borrow as a pensioner? You should think about that
If you are retired and need to borrow money, what are the possibilities or obstacles?
– To begin with, it is not strange if a so-called capital release credit is attractive if you are a pensioner with a low pension but a house with a large value and a low loan. But since this type of loan runs the risk of being unprofitable, I think I should definitely start by checking if you can instead extend the regular home loan, says Frida Bratt.
Photo: Fredrik Sandberg/TT
Even if, according to Bratt, you don’t have the best negotiating opportunities as a pensioner, it’s worth trying to increase the mortgage.
– And don’t be content with just checking with one bank, he says. If this is not possible, the possibility of enlisting the help of relatives to extend the loan can be considered. Otherwise, it may simply be more about reducing your housing costs: renting out part of the home or moving to a cheaper home.
– I think you should think twice before taking out any type of unsecured loan. They are often very expensive and can taste sour in the end.
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