SHARE
COPY LINK

MONEY

Norwegian banks criticised for not passing higher interest rates to savers

Banks in Norway have been criticised by a consumer rights watchdog for increasing the interest it applies to deposit and saving accounts much slower than the interest charged on loan and remortgage repayments.

Pictured is a jar of savings in change.
Norwegian banks are under fire for not increasing interest rates on savings accounts enough. Pictured is a jar of savings in change.

Interest rates have been steadily rising in Norway over the past 18 months. The current key policy rate set by Norges Bank is 3.75 percent.

For those with loans and mortgages, this means interest charges in the region of four percent. However, banks have been a lot slower in applying the increased interest rates to those with savings accounts.

This is despite banks like DNB making large profits from interest charged to customers. Norwegian banks made around 103.3 billion kroner in interest income in 2022, public broadcast NRK reports.

“Deposit customers have become a cash cow for the banks. Many banks are quick to increase the lending rate when the key rate rises. But now many are delaying increasing the deposit rate, or only partially increasing it,” Jorge Jensen from the consumer rights watchdog, the Norwegian Consumer Council, told NRK.

Are Oust, a professor of financial economics at the Norwegian University of Science and Technology (NTNU), said that this was a common tactic from banks to increase profit margins.

“By increasing the lending rate faster or more than the deposit rate, the banks’ net interest margin increases,” he said.

Hallgeir Kvadsheim, a consumer economist, said banks were taking advantage of customers not seeking out the best deal often enough.

“I understand that the banks operate as they do. They take advantage of the fact that customers are lethargic. This applies in particular to some of the large banks. We as consumers have to toughen up and change banks more often,” he said.

The Consumer Council recommends that customers use comparison services in order to try and get the best deal on interest rates.

“Far too many people do not use their customer power. There is a lot of money to be made from making a phone call to the bank,” Jensen said.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

ECONOMY

‘Turning point’: What the future holds for Norway’s economy

The standstill in Norway's economy may soon be at an end, according to a new report from Norway's national data agency. The agency isn't alone in its optimistic outlook, as the country's PM has said the country is at a 'turning point'.

'Turning point': What the future holds for Norway's economy

Norway’s economy should begin to pick up in the coming months and years after a period of stagnation, according to a national data agency, Statistics Norway, in a forecast on the Norwegian economy.

“With lower interest rates and clear wage growth, household consumption will increase. Economic activity will also pick up as a result of increased public consumption and an increase in housing investment,” said Thomas von Brasch, head of research at Statistics Norway.

The stagnation would likely continue for the rest of 2024 before picking up in 2025 and returning to a more neutral position in 2026.

“The standstill in the Norwegian economy is soon over,” von Brasch said.

After a period of high inflation, peaking at 7.5 percent in October 2022, price rises have begun to moderate. During this period, inflation in Norway was at its highest level since the 1980s.

This is good news for those hoping for lower interest rates, as the central bank had raised rates rapidly to try and control inflation and get it towards a target of two percent.

“Lower inflation at our trading partners will cause inflation here at home to continue to fall. Reduced interest rates internationally also contribute to the policy rate being gradually cut in Norway,” von Brasch said.

After the latest inflation figures for Norway were released, many economists predicted that the first cut would arrive around December. Between May 2023 and May 2024, inflation was measured at 3 percent.

READ ALSO: What Norway’s latest inflation figures mean for your finances

Market rates, the interest rates consumers pay, are expected to fall from around 4.7 percent this year, to 4 percent next year, and 3.5 percent the year after.

Norway’s PM, Jonas Gahr Støre, said the Norwegian economy was at a “turning point”, with the future looking much more positive for those in Norway.

“It is good news for people’s finances and clearly confirms that we are at a turning point in the economy where people can get better advice. Statistics Norway estimates that price growth will continue downward, so interest rates can eventually be lowered. They also expect increased purchasing power for people this year and in the following years. The government aims for people to get better advice,” PM Jonas Gahr Støre told Norwegian newswire NTB.

One factor that had the researchers at Statistics Norway more uncertain was the development of the Norwegian krone.

“The development in the krone exchange rate is important for inflation, among other things through import prices measured in Norwegian kroner. There is great uncertainty surrounding exchange rate movements,” the report read.

However, it added that keeping exchange rates the same in the coming years could be considered a positive development. This may disappoint those who have been negatively affected by a weakened krone.

Still, there was much better news when it comes to wages. Over the past eight years wages have barely grown in real terms, meaning price increases have outpaced wages. Workers in Norway can look forward to real wage increases of around 1.5 percent until 2027.

Unemployment would rise slightly in the coming years, though, from 4 percent currently to 4.2 percent in 2025.

SHOW COMMENTS