Swedish banks reduce lending rates following interest rate cut by Riksbank

Following the Riksbank’s interest rate cut on August 20, Swedish major banks have reduced their lending rates. However, the non-profit organization Sveriges Konsumenter feels the adjustments are happening too slowly. Yasemin Bayramoglu, the communications officer at Sveriges Konsumenter, expressed concern, stating, “This is exactly what we feared. We saw during the first rate cut last spring that banks delayed adjusting their rates accordingly.”

Bayramoglu emphasized the frustration faced by consumers, who have endured high inflation, rising food prices, expensive mortgages, and significant rent increases over the past few years.

The concept of “rockets and feathers” is relevant here, highlighting a pattern observed by economists. Banks worldwide tend to swiftly increase mortgage rates in response to central bank rate hikes but decrease them much more slowly when rates are lowered. This pattern is evident in Sweden as well, particularly after the Riksbank’s latest rate cut.

“Banks are once again trying to profit off their customers by withholding interest rate reductions or partially applying them,” Bayramoglu added.

Notably, Swedish banks’ profit margins are exceptionally high compared to their European counterparts. A study by the Swedish Bankers’ Association from October 2023 indicates that Sweden ranks highest in profitability relative to comparable countries. In the second quarter of this year, Sweden’s four major banks reported a pre-tax profit totaling over 50 billion kronor following the Riksbank’s first interest rate cut in a long while.

Bayramoglu advises consumers to consider switching banks, although she acknowledges that many find it challenging to do so, despite it being a necessary action for more people.