A stable, well-functioning financial market for allA stable, well-functioning financial market for allBank interest rates and lending, Q2 2012
The growth rate of lending to households and corporations is decreasing, but remains positive and is clearly higher than the corresponding figure for the eurozone. Banks' margins on mortgages increased in the same period, according to the second quarterly report.
Swedish banks have already to a great extent adapted to forthcoming capital adequacy regulations and liquidity buffer requirements. Despite this adaptation to the tougher requirements, lending to corporations and households is increasing. While the growth rate of lending to non-financial corporations indeed decreased in the last quarter, it remains positive, unlike lending to non-financial corporations in the Eurozone, which is decreasing. Lending to households is still increasing, but at a lower rate than before due to factors including the mortgage cap introduced by FI in 2010. The growth rate for loans to households is at its lowest level since 1997.
FI has continued to monitor the mortgage margins trend. FI has used the same model as in the first report, and calculated an average funding cost and margin for mortgages. FI's calculations show that the funding cost decreased in the second quarter compared with the first quarter this year. This is mainly because interest rates on covered bonds have decreased. The lending rate to households has decreased at the same time, but not to the same extent.
The banks also have other costs apart from the funding cost. Once these too are deducted from the lending rate, the margin for the second quarter amounted to 0,46 percentage points on average, compared to 0,40 percentage points for the first quarter. FI calls this margin the net margin which could, somewhat simplified, be viewed as the banks' profit on mortgages. The reason why the net margin rose in the second quarter is that the funding cost decreased more than the lending rate to households. The net margin is now at the highest level since 2002, which is when FI's calculations commenced.
Besides mortgages the banks also offer other services and products to their customers. When negotiating the terms for the mortgage, the bank considers all banking services of the customer. It is important that customers are aware of what they are paying for these services, and not only aware of the interest rate on their mortgages.
