Bank interest rates and lending, Q4 2012 (summary)

2012-12-31 | Reports Bank

Both the banks' funding cost and lending rates to households and corporations fell sharply during the fourth quarter of 2012 while the banks' margins on new mortgages increased slightly. Lending to Swedish corporations and households increased during the fourth quarter, but at a slower rate than before. During 2013 Finansinspektionen (FI) will investigate potential measures for how credit institutions can increase the awareness of their customers for how the actual lending rates for mortgages are determined.

Lending to Swedish non-financial corporations and households continues to increase, albeit at a lower rate than before. Growth in loans to Swedish households for housing purposes did not change in comparison to the previous quarter. The growth rate of lending to non-financial corporations decreased during the fourth quarter of 2012 to 1.7 per cent. Some corporations found it more difficult than normal to finance their operations during the fourth quarter than during the previous quarter. However, the majority of corporations that were surveyed answered that their financing alternatives had not changed in comparison to the third quarter.

The major Swedish banks are well capitalised and continue to have good access to cheap funding. According to FI's calculations, the banks' funding cost decreased by 0.60 percentage points during the quarter. Lending rates to households also fell sharply, but not as sharply as the funding cost. The gross margin for a newly issued three-month mortgage therefore increased slightly and on average was 1.33 percentage points during the quarter. The net margin, following deductions for other costs, also increased and was 0.64 percentage points on average during the quarter. This is an increase of 0.07 percentage points compared to the previous quarter. Another factor behind the increase in the net margin is that, according to FI's calculations, the cost for maintaining a reserve of liquid assets decreased during the quarter.

FI's assignment to monitor the loans granted by credit institutions and the terms and conditions of these loans has been extended through 2013. FI also received a new assignment to investigate and present potential measures for how credit institutions can increase the awareness of their customers for how the actual lending rates for mortgages are determined. This assignment shall be reported to the Government no later than 1 August 2013.

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