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Swedish bank cuts discount rate, making it easier to get a mortgage

A Swedish bank's decision to cut one of its key rates means that more people will be able to get a mortgage. Here's what it means for you.

Swedish bank cuts discount rate, making it easier to get a mortgage
There are several factors that influence a bank's decision to offer a mortgage, and this is one of them. Photo: Fredrik Sandberg/TT

State-owned mortgage bank SBAB lowered its discount rate (we will explain what that means shortly) by half a percentage unit to six percent on Tuesday, after cutting it from seven to six-and-a-half last year.

The decision follows falling interest rates in Sweden and the rest of the world.

“We believe that interest rates have settled on a structurally lower level than before, and it is not likely that they will risk rising significantly in the near future. There's room to lower the discount rate then,” Klas Danielsson, CEO of SBAB, explained the decision to Swedish newswire TT.

But we know what you're thinking: what does this mean for you?

The discount rate is essentially one of the factors SBAB and other banks use to assess a lender's long-term ability to pay back the loan, taking into account future increases to the general interest rate and increased costs for the customer. So in short it affects how much money you can borrow from the bank.

SBAB said its decision to lower the discount rate means that customers will effectively be able to borrow around 10 to 17 percent more today compared to when it stood at seven percent, depending on other factors such as amortisation – exactly how much you plan to pay off on your loan every month.

Swedish banks are currently offering customers the chance to hold off on amortising their mortgage, meaning that customers only have to pay interest and not pay off the loan itself. This decision was made on the back of coronavirus-fuelled economic concerns and is in force until August next year.

However, you should always think twice before taking on extra loans, and how big a mortgage you get for a new property should also depend on your own assessment of your ability to pay it back. It is generally better to err on the cautious side, and keep a future amortisation requirement in mind.

SBAB's discount rate is on the lower end of the scale. On average Swedish banks currently offer a discount rate of seven percent. SEB's discount rate currently stands at six percent, Nordea's at seven percent and Handelsbanken's at just above seven percent, and no one else expects further changes.

“We estimate a discount rate of 7.5 percent and look at the customer's income, expenses, assets and potential debts when assessing their ability to repay (the loan),” Petri Rask, head of product and business development at Handelsbanken's mortgage institute Stadshypotek, told TT in an email.

Swedish vocabulary

discount rate – (en) kalkylränta

mortgage – (ett) bolån

amortisation requirement – (ett) amorteringskrav

interest rate – (en) ränta

to pay – att betala

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MONEY

How to avoid falling victim to tax scams in Sweden

Sweden's tax agency, Skatteverket, warns of an increase in scams when it's time for Swedish tax-payers to declare their taxes.

How to avoid falling victim to tax scams in Sweden

Anyone who earned more than 22,208 kronor last year received their tax returns digitally last week, marking the start of tax season.

That also means an expected peak in tax-related scams, Skatteverket warns.

Most of the scams are so-called phishing scams, meaning attempts to steal the victims’ personal information. Fraudsters may for example email a person, pretending to represent Skatteverket, and ask them for, among other things, their banking details.

“We’re seeing these in all channels. They use fake emails, SMS, letters and in some cases even phone calls. It is particularly common in tax declaration times – just when we’re about to send out the tax returns, the e-service opens and it’s possible to declare – but above all when it’s time for tax rebates,” Jan Janowski, a Skatteverket expert, told Swedish news agency TT.

A scam email might for example state that you’re entitled to a tax rebate and that you should click a link to receive it. Don’t click any links, open any attachments or reply to the message. Skatteverket advises that you immediately delete the email or text message.

Another common scam is that you receive a text message claiming to be from Skatteverket, telling you that you owe them money and you need to log in to calculate the amount. The website you’re urged to log in via does not belong to Skatteverket. Don’t click the link.

The agency stresses that it never asks people for their banking details. The exception is that you may be asked for your bank account information if you log into Skatteverket’s website to declare your taxes, but that always first requires you to log into the site.

To receive your tax rebate, you need to inform Skatteverket of your bank account number. You do this not by clicking a link in an email or SMS, but by logging into their website using a digital ID, for example BankID, and submitting your details. Only do this on your own initiative. If someone calls you and asks you to log in with your BankID during the phone call, don’t do it. That’s another common scam.

Skatteverket will also never call you to ask for your bank account or credit card number.

It will be possible to declare your taxes from March 19th. You’ll receive any tax rebate you’re owed by mid-April or early June, depending on when you submit your tax return. These are the dates when fraudsters are likely to attempt the most scams.

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