SBAB forecasts two Swedish rate hikes before year-end

State-owned mortgage bank SBAB now expects the Riksbank to raise its policy rate twice before the end of the year, according to SVT. The bank says the prospect of a prolonged closure of the Strait of Hormuz could increase global inflationary pressure.

“We are now changing our forecast and including two policy-rate increases before the end of the year,” SBAB chief economist Robert Boije said in a press release.

SBAB expects the rate to rise from 1.75 per cent to 2.25 per cent, probably through increases in November and December. The bank had previously expected the Riksbank to leave the rate unchanged at 1.75 per cent for the rest of the year.

According to Boije, the closed Strait of Hormuz in the Persian Gulf, which he links to the Iran war, could remain shut for some time. That would increase inflationary pressure through higher energy and transport prices, he said.

SEB senior economist Robert Bergqvist also expects the policy rate to rise. He describes the current rate of 1.75 per cent as probably somewhat expansionary and is concerned about consumption-focused election promises from parties in the Swedish parliament.

“We could be heading towards a situation where parliament gives households money with one hand and the Riksbank takes it back with the other. The monetary policy equation is becoming increasingly complex,” Bergqvist wrote in a report.

Longer mortgage rates also under pressure

The Riksbank’s policy rate primarily affects short-term interest rates, including variable-rate mortgages. But longer-term mortgage rates are also facing upward pressure because they are based on the cost banks incur when borrowing on the bond market.

The yield on a 10-year Swedish government bond, a market benchmark, has risen from 2.53 per cent at the end of June to 2.89 per cent. Over the same period, the 10-year US yield rose from 4.37 per cent to 4.68 per cent and drove global developments.

Market pricing also points to higher Swedish policy rates. A rise to 2.00 per cent this year is fully priced in, while market participants expect two further increases during the first half of 2027, taking the rate to 2.50 per cent.

If mortgage rates rose by the full 0.75 percentage points, a mortgage of three million Swedish kronor would become 1,875 kronor more expensive per month next year, excluding the effect of the interest deduction.