– Can lead to a heavy start in the fall – E24

If you haven’t learned about the high interest rates and high inflation in your economy, you should do so now. Don’t go on vacation and aren’t sure if you can actually afford it, says Thea Olsen, consumer economist at Danske Bank.

She believes that many did not realize the importance of high prices on their finances, although many have read about them in the media.

In May, prices were 5.7 percent higher than in the same month last year, according to the latest figures from Statistics Norway’s inflation office. Meanwhile, core inflation (inflation excluding electricity and tax changes) rose to 3.4 percent.

On Thursday, Norway’s Bank raised its key interest rate by 0.5 percentage point to 1.25 percent, the biggest jump in interest rates in 20 years.

At the same time, Governor Ida Waldenbach announced that interest rates are likely to rise further in the remaining four interest rate meetings this year.

– clear warning

Accelerated price growth and higher interest rates mean that summer vacation will also be more expensive, regardless of whether you choose a Norwegian or foreign vacation.

Olsen believes that the recent rate hike is a clear signal to those with loans that one should be more careful with the use of the money in the future.

The interest rate increase is a clear warning. This will hurt most immediately in Norwegian households, as we are at full speed on the way to a mortgage rate of more than four percent, she says.

It reiterates the importance of understanding how high inflation and high interest rates affect the private economy. At the same time, she advises people to have the buffer account in place.

Most people who have mortgages should be concerned about higher interest rates. Everyone should clean up their personal finances now.

evil vortex

Olsen realizes that people want to do something other than walk in the mountains and sleep in tents two years into the pandemic. At the same time, strike a blow for using the local area if your vacation budget is tight.

She warns against taking a vacation that you can’t really afford.

Going out crooked in the fall and going into the winter with higher debts is very heavy and stupid. Once you fool yourself into the vicious cycle of consumer loan and credit card debt, she says, it can be hard to get out of it, too.

Nordea consumer economist Derya Enkidorsson also warns of the consequences of providing a more expensive holiday than it really should be.

Lots of people would be tempted if you had a credit card, and they thought you could pay it off later. You have to be careful about that. It could spell a heavy start to fall for many, she says.

Incedursun believes it may be wise for many to take an overview of their finances, and cut budgets where possible.

At the same time, she points out, many these days don’t have room in the economy to make cuts.

Although people have saved their money over the past couple of years, high prices can put sticks in the wheel for another summer vacation.

During the pandemic, it became a form of forced savings for many, and families saved millions of kroner. However, these savings have been devoured by many due to the high prices, says Inkiderson.

It is understood that people want to treat themselves to things and experience the freedom to do whatever they want after the pandemic. Now, however, it is the economy, not the pandemic, that is setting the limits for the holiday, she adds.

It’s scary to spend money you don’t have

Thea Olsen thinks everyone should do an accounting of their expenses before going on vacation this year.

It’s scary to spend money that you don’t have at these times. If you really can’t go on vacation, drop it, she says.

Olsen hopes that people will be able to look a little longer and think long-term when it comes to their finances.

When you get the holiday money into the account, you should make a good assessment of what your financial situation will look like in the fall. If you have a temporary account, you may want to prioritize it rather than indulging in expensive things, she says.

Derya Incedursun advises people to plan their vacation budget as much as possible, especially now that many are concerned about rising inflation.

Like Olsen, she recommends taking a vacation home in the local area if you’re concerned about your fall financial prospects.

Even people with ordinary incomes can feel that it will be difficult in the future. So it would be wise to go through all the expenses you have, from housing rent, electrical agreements, and insurance, to see if there are any steps you can take here, she says.