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Largest decline in interest rates ever
statistikk
2009-05-20T10:00:00.000Z
Banking and financial markets
en
orbofrent, Interest rates in banks and other financial enterprises, interest rates, interest on loans, deposit rates, interest margins, banks, mortgage companies, state lending institutions, life insurance companies, Norwegian Public Service Pension FundFinancial institutions and other financial corporations, Banking and financial markets
false

Interest rates in banks and other financial enterprises, Q1 2009

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Largest decline in interest rates ever

In the first quarter of 2009, the interest rate on loans from banks and mortgage companies fell strongly while there was an increase in the interest rate on loans from state lending institutions. The average interest rate margin in banks fell.

Interest rates on loans and deposits in banks, Norges Bank's key policy rate and the NIBOR rate. Q1 2004-Q1 2009

Interest rate margin total and interest rate margin on loans. Q1 2004-Q1 2009

The average interest rate on loans from banks fell by 2.03 percentage points (p.p.) in the first quarter of 2009 to 5.24 per cent. In the same period, the average interest rate on deposits fell by 1.75 p.p. to 2.86 per cent. As a result of this, the average interest rate margin fell by 0.29 p.p. to 2.38 percentage points. This is the largest fall in the interest rate on loans and deposits in one quarter for the period where we have quarterly data (since 1979). The average interest rate on loans from mortgage companies fell by 2.03 p.p. to 4.41 percentage points, while the interest rate on loans from life insurance companies fell by 0.89 p.p. to 4.69 percentage points.

Interest rate margin on loans fell 1 percentage point

The fall in interest rates is affected by the reduction in Norges Bank’s key policy rate on 17 December 2008 by 1.75 p.p. and on 4 February 2009 by 0.5 p.p. In the same period, the money market rate (3 month NIBOR) fell by 1.04 p.p. The interest rate margin on loans fell by 0.99 p.p. while the deposit margin increased by 0.70 p.p.

Difficult to reduce the interest rate on wage accounts further

The reason why the fall in the average deposit rate was lower than the fall in the average interest rate on loans from banks may be that the interest rate on wage accounts was already at a low level in the previous quarter. Hence it may be difficult to reduce this interest rate much further.

Interest rates at 2007 level

The interest rates on loans from banks are now about the same level as two years earlier.

The impact of the fall in the key policy rate on 25 March and 6 May will be reflected in the interest rate data for the second quarter. According to Norges Bank’s Monetary Policy Report no. 1/2009, the key policy rate may drop to 1 percentage point in the second part of 2009. Hence the interest rates on bank loans and deposits may fall further. The lowest level for the interest rates on loans from banks for the period where we have observations was 3.82 percentage points in the second quarter of 2005, while the lowest level for the deposit rate was 1.25 percentage points in the second quarter of 2004.

Rise in the interest rate on loans in state lending institutions

The interest rate on loans from The Norwegian Public Service Pension Fund fell by 1.07 p.p. to 5.32 percentage points, while the interest rate on loans from state lending institutions increased by 0.06 p.p. to 5.70 percentage points (excluding loans to students with a zero interest rate).

By the end of the first quarter of 2009, the interest rate on loans with home mortgages from The Norwegian Public Service Pension Fund and from state lending institutions was higher than on loans with home mortgages from banks and mortgage companies. The reason is that the floating interest rates on loans from the Housing Bank are determined by the interest rates on treasury bills three months before the decisions are made. The interest rate on loans from The Norwegian Public Service Pension Fund follows the official norm rate that is also determined by the interest rates on treasury bills, but with an observation period of two months only.

Interest rates in financial corporations 1st quarter 20091
 
  31.03.2009 31.12.2008 30.09.2008 30.06.2008 31.03.2008 Changes in interest rates Share of loans. Per cent
  Last quarter Last year 31.03.2009 31.12.2008
 
Total loans from banks 5.24 7.28 7.80 7.41 7.00 -2.03 -1.76 69.0 70.9
Total bank deposits 2.86 4.61 5.60 5.05 4.76 -1.75 -1.90    
Banks' interest rate margin (1-2) 2.38 2.67 2.21 2.37 2.24 -0.29 0.14    
                   
Lending rate, mortage companies 4.41 6.45 6.86 6.44 6.11 -2.03 -1.70 22.1 20.3
Lending rate, life insurance companies 4.69 5.57 6.51 6.30 5.78 -0.89 -1.09 1.1 1.1
Lending rate, state lending institutions1 4.91 4.95 4.59 4.53 4.34 -0.04 0.57 7.7 7.7
Lending rate, state lending institutions exsclusive loans with zero interest rates in the Norwegian State Educational Loan Fund1 5.70 5.65 5.40 5.27 5.06 0.06 0.64 6.7 6.7
Total loans from financial corporations2 5.03 6.91 7.37 7.03 6.66 -1.88 -1.63  100.00  100.00
                   
The Norwegian Public Service Pension Fund 5.32 6.39 6.39 5.87 5.61 -1.07 -0.29    
                   
NIBOR (3 month effective) 2) 3.05 4.09 8.03 6.83 6.35 -1.04 -3.31    
Deposits margin (8-2) 0.18 -0.52 2.43 1.78 1.59 0.70 -1.41    
Loans margin (1-8) 2.20 3.19 -0.22 0.58 0.65 -0.99 1.55    
                   
Banks. Repayment loans with home mortgages 4.86 7.12 7.44 7.05 6.72 -2.25 -1.86 32.1 33.3
Banks. Credit loans with home mortgages 4.42 6.86 7.23 6.87 6.51 -2.44 -2.09 7.7 8.2
Banks. Loans margin repayment loans with home mortgages (9 - 8) 1.82 3.03 -0.59 0.22 0.37 -1.21 1.45    
Banks. Loans margin on credit loans with home mortgages 1.38 2.77 -0.79 0.04 0.16 -1.40 1.22    
                   
Mortgage companies. Repayment loans with home mortgages 4.49 6.91 7.37 6.93 6.58 -2.42 -2.09 9.5 8.3
Mortgage companies Credit loans with home mortgages 4.27 6.72 7.23 6.79 6.51 -2.45 -2.24 4.0 3.5
Life insurance companiess. Repayment loans with home mortgages 4.58 5.42 7.14 6.53 6.16 -0.84 -1.59 0.4 0.4
State lending institutions. Repayment loans with home mortgages 5.06 5.09 4.86 4.78 4.66 -0.02 0.40 2.8 2.8
                   
Financial corporations total: Repayment loans secured on dwellings 4.79 6.93 7.26 6.89 6.57 -2.14 -1.78 44.8 44.8
Financial corporations total: Credit lines from financial corporations 4.37 6.82 7.23 6.85 6.51 -2.45 -2.14 11.7 11.7
Financial corporations total: Housing loans total from financial corporations 4.71 6.91 7.26 6.89 6.56 -2.20 -1.86 56.5 56.5
                   
Key policy rate3 2.00 3.00 5.75 5.75 5.25 -1.00 -3.25    
Overnight lending rate3 3.00 4.00 6.75 6.75 6.25 -1.00 -3.25    
Total loans from banks and mortgage companies 5.04 7.09 7.62 7.25 6.86 -2.05 -1.82 91.1 91.2
 
1  Weighted average interest rates incl. commissions on NOK loans from banks and other financial corporations. Weighted average interest rates on deposits in banks from non-financial enterprises, households and local government.
Weighted average interest margins in banks. Per cent per annum.
2  Includes banks, mortgage companies, life insurance companies and state lending institutions. The Norwegian Public Service Pension Fund is not included.
3  Norges Bank.

Definitions and other important information:

The interest margin: the difference between banks’ average lending and deposit rates

The lending margin: the difference between banks’ interest rate on loans and the NIBOR rate

The interest margin on deposits: The difference between the NIBOR rate and banks interest rate on deposits

 

By the end of the first quarter of 2009, the interest rate statistics encompassed three state lending institutions, five life insurance companies, 20 mortgage companies and 150 banks plus The Norwegian Public Service Pension Fund.

Tables

Published tables