Norges Bank decided on Thursday The policy rate should be increased 0.5 percentage points to 1.75 percent. Many banks have already followed suit.
The prices of electricity, food and services have already skyrocketed.
– Everything has become more expensive and will become more expensive, and this puts pressure on many people’s personal finances, says Derya Incedursun, consumer economist at Nordea.
And he believes that Norwegians should be prepared to change their way of life.
I don’t think everyone took action
Even if interest rate hikes are high in the short term, we have to worry that it will rise further, Incedursun believes.
– Most people have loans and floating interest rates, so many families will feel this financially, he says.
Lene Drange, a financial advisor at Luksusfellen, believes that many people are starting to feel the intensity.
– I think people are beginning to understand the situation, talking about almost the same thing. Whether people start to improve by reducing consumption and saving buffers, however, I think varies, Trenge says.
Incedursun is not sure.
– I think people don’t take it, especially that you don’t have to count on interest rates going up five percentage points, says the consumer economist.
He points out that banks take this into account and start from very tight budgets when offering mortgages to private individuals.
– We are in a situation where many families have to deal with a tight budget, says Incedursun, when they applied for a loan they were granted.
Consequence: As a result of the increased prices, many people will have to restructure their personal finances, according to consumer economists. Photo: Ørn E. Borgen / NTB Photo: Ørn E. Borgen
Very difficult for a group
Although most people notice that these are new times, Drange believes that most people will manage this period well.
– During the pandemic, many received better advice. At the same time, he says, it is dramatic that 900,000 people cannot afford such an extraordinary expense.
Expert: Leanne Trench believes many people are starting to feel serious.
The figure he cites is taken from a survey by Statistics Norway. More than that was revealed there 900,000 Norwegians No chance to manage an unexpected expense of NOK 19,000. The study was conducted before hyperinflation and power crisis in 2022.
– In light of rising prices, an even larger proportion of the population will struggle with unexpected costs, said senior adviser Matthias Rewald. SSP
Drange believes there is a big difference in how the situation affects a private individual who owns a home and someone who rents.
– Renters do not have the same freedom with their finances to extend the term of the loan or ask for freedom of payment. Renters have fixed costs, usually earn the least and have low wage growth.
Owner or Tenant: Homeowners have more steps to take than renters. Photo: Jan-Peter Dahl/TV2
– Economically risky
Norway ranks first in the world in debt. While economists believe many households can cope with a higher loan-to-value ratio, it’s worse with unsecured debt.
– People with more unsecured debt are in a more difficult situation than those with secured debt, Drange says.
Unsecured credit is linked to the use of credit cards or consumer loans.
– For example, if you took out a consumer loan to pay off the mortgage, it starts to get really scary. Interest on unsecured loans is usually very high and very difficult to negotiate, he says.
Drange believes that having a credit card that you use while traveling is fine, as long as you pay off the expensive interest and repayments up front.
– Do you have three or four different credit cards that you’re trying to refinance, but then you start using the cards again? That’s when it becomes drama. Then you approach a luxury trap, he says, and then it’s time to stop.
Luxury: Are you paying for goods and services without being able to repay them? Then you approach a luxury trap, Drange says. Photo: Aage Aune / TV 2
Incedursun encourages everyone to avoid accumulating unsecured debt.
– Holding consumer credit and credit card debt is financially risky if you don’t have a chance to pay it off before the interest starts to accrue, he believes.
If you find yourself in such a situation, a consumer economist encourages you to prioritize paying off unsecured debt first.
Be a little “tough.”
For those who are beginning to feel overwhelmed by the economy, there is advice.
– Many need to change their consumption. The best thing you can do is go over your spending habits and figure out what you can cut back on, says Incedursun.
Avoid: Avoid unsecured debt and pay it off first, advises Teria Insetursun at Nordea. Photo: Martin Lakeland / TV2
If you’re worried about whether you’ll be able to make repayments on the mortgage, check to see if you can extend the repayment period or get a waiver from repayment for a period of time.
– Before going too far, check with your bank. There you can talk to an advisor about your personal finances, get an overview of your spending and advice, he says.
Drange emphasizes that as a customer you can be a little hard on the bank.
– See what other banks are offering and negotiate the best offer. Now that the interest rate is rising, many kroner have started to be added to the savings. Plus, there’s a tight labor market, so I think it’s possible to raise incomes a little bit, he says.
Incedursun believes you should negotiate all financial agreements you have, from electricity contracts to insurances, to determine if you can get the best terms.
– Consumers have more power, says Insedurson.
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