Norway’s biggest bank, DNB, didn’t waste any time in raising interest rates on its home loans. It became the first Norwegian bank on Friday to warn customers that rates would rise by a quarter-point from November 4.
DNB’s increase comes just a day after Norway’s central bank announced the same increase in its key policy rate. It rose from 0.50 percent to 0.75 percent. A spokesperson for the already highly profitable DNB claimed that “after a long period with historically low mortgage rates, it’s not surprising the interest rate level now rises.” She added that “several factors” influence the rates customers pay, and that expectations of a rise in the key policy rate have affected other rates “over time.”
Other banks were likely to follow DNB’s lead but consumer advocates urged customers to challenge the increases. “Folks shouldn’t just accept that the bank raises its mortgage rates when Norges Bank hikes its key policy rate,” Elisabeth Realfsen, leader of the state consumer council (Forbrukerrådet), told Norwegian Broadcasting (NRK) on Friday afternooon. She and others have noted that most banks already have profited from historically wide spreads between the key policy rate and current home loan rates of around 3 percent plus monthly fees that already can bring effective rates up to nearly 4 percent.
Realfsen advised mortgage customers to either call the bank and negotiate a better rate or move their business to another bank that offers lower rates.