Warning: Interest rates can now be raised shock – Expressen

It was during a breakfast meeting the Deputy Governor Henry Ohlsson delivered the warning to the increasingly indebted Swedish people.

In recent years, interest rates have been lower than ever before in modern times – which pushed both prices on the housing market and household debt.

Read also: Amortization requirement is not enough

– For those who put themselves in debt, it may be good to remember that lending rates in the long term can reasonably be be 3-4 times higher than today, struck Henry Ohlsson fixed at a breakfast event organized by Swedbank.

Important to think long term

the Deputy Governor also offered a macroeconomic intelligence where he noted that many central banks lowered their key interest rates to historically low levels to stimulate demand and cause inflation to rise. It pressured international interest rates also affect monetary policy in Sweden.

The Riksbank’s forecast is that the repo rate will remain at low 0.5 percent until sometime in mid-2017 – and then slowly begin to rise, told Henry Ohlsson.

But even if interest rates continue to be low in terms of the long-term thinking on major investments, such as at home.

also read: Everything you need to consider before amortization requirement

Many economic decisions have consequences that extend further into the future. This applies for example for household today borrow to buy a home, he said.

Henry Ohlsson also told about the different factors that depress the central banks’ interest rates.

Central Rally pushes interest rates

the long-term nominal interest rate, ie the rate that we normally encounter in everyday life, guided by the long-term real interest rate and the inflation target. The real interest rate – that is the nominal interest rate minus the expected rate of inflation – in turn determined the long-term structural factors, such as savings and investment, the Riksbank in a transcript of the speech.

Also read: Goran Persson warns of new financial crisis

and in a small open economy like Sweden determined the factors foremost in the world, stated Henry Ohlsson.

monetary policy is the policy related to a country’s interest rates, money supply and the value of money – which the Riksbank, as an independent central bank is responsible for.

Through various monetary policy measures, the Riksbank can affect both inflation and inflation expectations.

the inflation target must be credible

for that inflation expectations should be in line with the inflation target, it is necessary that the inflation target has credibility. The Riksbank has decided that inflation is 2 percent.

Read also: Expect higher home prices

Monetary policy can not affect real interest rates significantly in the longer term, pointed out Henry Ohlsson.

Henry Ohlsson’s assessment is that we must prepare for the global real interest rates will be in the order of 1.5-2.5 percent.

– If we add to this the inflation target and inflation expectations of 2 percent in Sweden, we would conclude that the repo rate could be around 3.5-4.5 percent. In the future, therefore, the interest rates on mortgage loans to be three to four times higher than current mortgage rates, said Henry Ohlsson.