International, News, Regulation

Norwegian banks raise mortgage rates, citing pending regulations

Flag of NorwayCiting pending regulations, several Norwegian banks have recently raised home mortgage interest rates, drawing complaints from politicians and the public that the banks are trying to blame new laws as part of an effort to increase income.

Norges, Norway’s central bank, announced last week that it would maintain its key lending rate at 1.5 percent, adding that rates would likely remain at record lows for another year, Views and News from Norway reports.

Nordea Bank said recently, however, that it would increase its lending rate on home mortgages from 3.5 percent to 3.8 percent at a time when interest rates are at record lows, citing a “warning of new requirements from the authorities,” though the new rules pertain to capital requirements. The rate increase will take effect on April 25 and will yield an annual rate of 3.97 percent.

DNB has also announced that it would raise rates, citing the same rationale used by Nordea.

“It remains unclear what the final regulations will be and when they will be imposed,” Tom M. Nilsen, the leader of Nordea’s consumer market, said, according to Views and News from Norway. “But the banks’ costs tied to making home loans will increase.”

Borrowers facing higher monthly payments and Labour Party politicians have criticized the rate increases, saying that the banks, which have recently reported strong profits, are prematurely increasing rates to boost their income and using new regulations as an excuse to do so.

“The banks are asking customers to pay a bill the banks haven’t even received yet,” Torgeir Micaelsen, a parliament member for the Labour Party and head of the parliament’s finance committee, said, Views and News from Norway reports. “I don’t know of other branches that allow themselves to do that. Think what would happen if a gasoline station raised prices for fuel because it thought a new tax might be imposed later. It’s not just upsetting, but proof that the banks have fingers that are much too long.”

The banks, however, have said that they are reacting proactively to new rules that would require banks to hold more capital, thereby requiring them to build up capital reserves in the meantime.

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