After Norges Bank reduced the policy rate to 0 during the Covid-pandemic, Norges Bank has increased the policy rate gradually and in September 2023 it was raised to 4.25. If this level is maintained in 2024, the mortgage rates in Norwegian banks will be close to 6 percent.
In this report we discuss implications of increased rates for the financial conditions of households. We describe the total interest expenditures for households in 2024, assuming a steady policy rate of 4.25, and the increased expenditures following from the rate hikes from 2021 to 2024.
We find that families with children are particularly exposed to increased mortgage rates. For example, net interest rate expenditures, which are interest rate expenditures minus interest rate income, increase by on average 34,000 kroner and 66,000 kroner for lone parent households and households with couples with children, respectively. With an average disposable income for lone parents and couples of 600,000 kroner and 1.2 million kroner, respectively, this indicates that the interest rate increase represents a substantial change in the financial circumstances for both types of families.