A likely coming proposal is that banks should be forced to have more capital in buffers to gain greater security. This is something that the Good Financial Supervisory Authority is expected to demand after the summer when the rules become a little tougher for the banks. However, this is something that is likely to affect the prices of mortgages.
It becomes more expensive
When the banks are forced to hold more capital, it becomes more expensive for them and this is something that will, in part, partly be placed on the bank’s customers and especially mortgage customers. It is likely that mortgage loans will become more expensive during the year despite the repo rate remaining low and likely to remain at this low level throughout the year at least.
Expect to raise mortgage rates to compensate
In an article I read that, for example, SEB stated that they expect to raise mortgage rates to compensate for these new rules and the costs they entail for the banks. As usual, it is us customers who suffer when the bank receives higher costs. Some may understand this, but it is always a bit silly for ordinary people to get stuck.
Mortgage rates could rise to give banks better margins
In general, the situation for mortgages is really good as the repo rate is very low and it looks like interest rates will remain at a low level for a good time to come. One could imagine that mortgage rates would thus remain at the same low level, but with these changes after the summer, it looks like mortgage rates could rise to give banks better margins.
More profitable but the reason they want to do so
These margins are simply more profitable but the reason they want to do so is, as I said, to be able to fulfill the requirement that the risk-weighted floor which is now 15% can be increased to 25%, which is a significant difference. This means that the banks need more capital ready in their buffer that cannot be used for other purposes.