The Krisbank’s shock reduction to 0% this week could hardly have avoided anyone. Mortgage customers are cheering, and the small savers are cheering the less. It is now record cheap to borrow from the bank at the same time as the zero interest rate means that, as a small saver, you instead lose money on having your money in ordinary savings accounts with zero percent interest. The Krisbank’s message has raised many questions and concerns among the Swedish people. One of the most common questions the Krisbank receives is whether the zero interest rate means that it is free to borrow money now. Another common question is what to do with your savings now and how to set up your personal finances under the new interest rate situation. Therefore, in today’s post, we will outline some of the most common concerns that the interest rate announcement has entailed over the past week.
Does the zero interest rate mean that it is free to borrow now?
No, it is not free to borrow money now because the banks’ lending rates (ie the interest rate you pay when you borrow money) will still be above the repo rate. However, the zero interest rate means that the interest rate situation will be unusually low over the next few years.
How should I as a mortgage customer think about the new interest rate situation?
One thing you can be sure of is that the interest rate will go up again sooner or later. Therefore, do not increase your debt by more than you can later afford when interest rates rise. Instead, you should see this as a great opportunity to seize your debt. Then you already get used to a higher monthly cost and become less sensitive to interest rate hikes in the future. If you do not want to repay your debt, you can now see it as a perfect opportunity to build a buffer. This makes you less sensitive to unforeseen expenses and future interest rate hikes.
What should I do with my savings now?
The worst thing you can do is keep your savings money on regular savings accounts at zero percent interest. It is therefore important that you compare the interest rates of different banks to find the bank with the highest interest rate and best terms for you. Often, the medium-sized banks have significantly more competitive savings office rates are the big banks, and there is no need to spend your money unnecessarily. If you save in the long term and are willing to take a little more risk in exchange for higher returns, you can invest in mutual funds or shares. It is then important that you make sure to compare fees and spread the risk so that you become less sensitive to depreciation.