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What will Sweden’s interest rate hikes mean for foreigners in Sweden?

Sweden's Riksbank now expects its base interest rate to be close to two percent in three years' time. What will this mean for foreigners living in Sweden?

What will Sweden's interest rate hikes mean for foreigners in Sweden?
A person leafs through Swedish bank notes. Photo: Pontus Lundahl/TT

How high could interest rates go? 

The Riksbank on Thursday increased its key interest rate above zero for the first time since the autumn of 2014.

But it isn’t going to stop there, it expects to hike the rate in small increments over the next three years, to 1.18 in the middle of next year, to 1.57 in the middle of 2024, and to 1.81 in the middle of 2024. 

At a press conference on Thursday, the bank’s governor Stefan Ingves said that people should prepare for higher rates, but stressed that there would be “no extreme rate levels”. 

“We’re not slamming on the brakes, more taking our foot off the pedal,” he said. 

It’s worth remembering, though, that in the run-up to the Swedish banking crisis in the early 1990s, the key interest rate moved from 1 percent to 2 percent to as high as 10 percent, before the Riksbank finally upped it to 500 percent in a desperate attempt to defend the krona. 

As recently as February the Riksbank was not expecting to raise rates from zero until 2024, so if inflation proves more stubborn than expected, the key rate could possibly go higher. 

But Robert Boije, chief economist at Swedish state-owned mortgage lender SBAB, said that as inflation today is most likely the result of higher energy prices, and supply-side constraints, rather than because there’s too much money in the system, the risk of seeing higher rates than the Riksbank has outlined is relatively small.  

“There’s a higher probability of a lower repo interest rate [than expected] in 2024 than of a higher interest rate,” he said. 

How will higher interest rates affect mortgage rates? 

According to Claudia Wörmann, SBAB’s housing economist, interest rates on floating mortgages could nearly double over the next year from around 1.8 percent today to about 3 percent in January 2026.

She expects two-year fixed mortgages, which are now at around 2 percent to rise to 3.4 percent in January 2025, while five-year fixed-rate mortgages will rise from 2.5 percent today to 3 percent in 2023 and 4.1 percent in 2026. 

Many mortgage lenders had already anticipated Thursday’s rent rise, with Handelsbanken/Stadshypotek, Skandiabank, and SBAB all upping their mortgage rates by as much as 0.25 percentage points last week. 

Bigger monthly payments for those with loans

According to Wörmann, someone with a million kronor mortgage who currently has a two percent interest rate, would see their monthly payment double from about 1,160 to 2,330 if their mortgage rate rises to four percent. 

As most borrowers pay more than they need to simply to meet their interest payments, however, many have some flexibility, meaning they can slow down their repayments to make it easier to bear the increased cost, she said.  

“One aspect is the interest rate, but you need to bear in mind that a normal household amortises much more than they pay in interest rates,” she said. 

Lower buying power for those without a mortgage

For foreigners in Sweden looking to borrow to buy a house, higher mortgage rates will reduce the amount of money they can borrow to buy a house or apartment.  

Houses and flats in Sweden might get more affordable

Two years of rising house prices showed signs of coming to halt last month. 

The Swedish financial supervisory authority warned earlier this month that in its worst-case scenario, where rising interest rates are compounded by higher power costs for consumers, house prices could fall by as much as 30 percent. 

In its less dramatic scenario, the prices of apartments owned as part of a cooperative – so-called bostadsrätter – would fall only slightly, while the price of detached houses would fall 10 percent. 

“Our prognosis is that housing prices at the end of 2024 will be about ten percent lower than what they were on January 1st this year,” said Boije. 

The decline will start with a 1.3 percent drop this year, followed by a bigger 6.1 percent drop next year, and then a 3.8 percent drop in 2024. 

For most buyers the affordability of housing will not change very much, Boije points out, as higher interest rates will reduce the amount they can borrow. 

“If there’s a one-to-one correlation between the interest rate and housing prices, then the use cost of housing in economic terms will not change very much,” he said. 

Foreigners who are able to buy in Sweden without taking out a loan, will see a benefit, however.

It will also become easier for those taking out a mortgage to gather together the 15 percent of the value of the property they are required, under Swedish law, to pay in cash. 

READ ALSO: Will Swedish housing prices plummet as interest rates rise?

Wörmann said there was little doubt that the increase would start to pull down house prices, particularly when you looked at rising costs and post-pandemic effects. 

“It’s more expensive to buy food, you have to take into account that people are spending much more money on electricity and on fuel,” she said.

“We are leaving a pandemic where we were stuck in our homes, which might have meant that people didn’t mind paying a lot of money for their house as they spent so much time there. Now we are released from our home, and that might change how we look at our homes and our willingness to buy something expensive.” 

For foreigners who have yet to buy a house or flat in Sweden, a 30 percent fall in prices would of course be quite welcome, increasing the affordability of property in the country. 

Foreigners paid in local currency may benefit from a stronger krona

The hike in interest rates saw the value of the Swedish krona rise against both the dollar and the euro on Thursday.

If the Riksbank has now left behind the loose monetary policy which saw it keep the key interest rates negative between February 2015 and December 2019, the krona could strengthen against other currencies. 

“If markets now expect the Riksbank to be more hawkish relative to the Fed in the US and the ECB, this should increase the value of krona,” Boije said. 

This will mean foreigners paid in kronor will earn more once their salary is converted into another currency. Conversely, those paid in euros or dollars, but living in Sweden, could see an effective salary cut. 

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For members


Politics in Sweden: Why Sweden’s finance minister is willing to be unpopular

She's been accused of being Sweden's 'most invisible modern finance minister'. But when she emerged from the shadows to present the budget last week, she showed she is also the minister most willing to take unpopular measures, writes The Local's Nordic editor Richard Orange.

Politics in Sweden: Why Sweden's finance minister is willing to be unpopular

The word that Elisabeth Svantesson repeated again and again, in every interview and in every speech around the budget was tuff, or “tough”, using it no fewer than 14 times in a 30-minute interview with Sweden’s public radio broadcaster on Saturday.  

“I know that it’s going to be tough,” she responded when asked why the government hadn’t given Sweden’s municipalities and the regions greater funding to help schools and regional health authorites deal with rising prices. “It’s going to tough for a lot of people next year.” 

But she was unapologetic. For her getting inflation under control was, she said, the “a och o” – the alpha and omega, or beginning and the end – of the budget. 

“If I’d done what some people are calling for and given even more money to the municipalities and the regions,” she argued, it would have meant “an even bigger budget”, which “would have fuelled inflation and then next year and the year after we would have had even bigger problems with increased costs”.

Sweden is facing, she has said again and again, an “economic winter”, and the only responsible way to respond is with a budget that is “restrained”.


For Svantesson, it is better to be criticised in the short term for a miserly budget than to go into the next election as the finance minister who let inflation take an unshakeable grip on the economy.

And if the mark of a good government budget is that it pleases no one but the officials in the finance department, then Svantesson has hit just the right balance. Her budget drew heavy criticism from both left and right, from both business lobby groups and the regional and municipal governments who run most of Sweden’s healthcare and education.  

For the Social Democrats, the decision to give an extra 10 billion kronor a year in direct funding to municipalities and the regions was “a betrayal of the welfare sector”. But for the Confederation of Swedish Enterprise, it was caving in to the unreasonable demands of regional governments and municipalities, wasting 40 percent of the extra funds available, which would have been better used to cut taxes. 

In her interview, Svantesson refused to be drawn on whether cuts would be needed to health and education, saying that this was up to the “smart people from different parties” in regional and municipal governments to decide. “They know best how to handle the situation and I don’t want to speak for them.”

Svantesson’s technocratic approach makes her a bit of an exception in Sweden’s current government.   

This is a government forced by its reliance on the far-right Sweden Democrats to drive a populist agenda: it is cutting fuel taxes and biofuels content when action is urgently needed to combat climate change; bringing in a raft of tough measures on crime that many criminologists say risk pushing up prison populations without solving gang crime; and taking measures to reduce immigration many see as illiberal. 

It sometimes feels as if figures like Justice Minister Gunnar Strömmer, Migration Minister Maria Malmer Stenergard, and Environment Minister Romina Pourmokhtari – none of them natural populists – do not themselves believe in many of the measures they are working to enact. 

Svantesson, on the other hand, is almost an unpopulist, going so far as to claim in her Saturday interview that she was more willing to take unpopular measures than her predecessors in the job.

“We are,” she boasted. “carrying out some of the tough reprioritisations that other governments have not dared to do”. 

The only nakedly populist tax decision she announced (possibly on the urging of the Sweden Democrats), was a small cut in the level of tax on snus, the tobacco pouches one in five Swedish men and quite a few women have permanently lodged under their upper lips.

“Snus is going to be a few kronor cheaper,” she said, rounding off the Saturday interview. “That’s something many people also think is good.” 

Politics in Sweden is a weekly column looking at the big talking points and issues in Swedish politics. Members of The Local Sweden can sign up to receive an email alert when the column is published. Just click on this “newsletters” option or visit the menu bar.