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Expensive mortgages should be expected in the nearest future – SEB CEO Annika Falkengren

Thursday, 31 May 2012
The CEO of the Swedish bank, SEB Annika Falkengren wants to heap more pressure on cost to customers in a new move which is being described as the banks shifting cost away as means of expanding their profit line.

Annika Falkengren (pictured below), according t a write up on Swedish daily Svenska Dagbladet posit that  Banks need to increase transparency and account for their mortgage margins more equally. The effect of this will be that in the future, customers can count on more expensive mortgages.

Mortgages business is one of the major sources of liquidity to Swedish bank and the Swedish FSA reports recently that Swedish banks are making lots of money from their banks' margins on mortgages which have gone up since the financial crisis.

In a subtle but tactical way, Annika Falkengren agrees with the view that banks have to increase transparency and to find a single accounting model.
"I'm a little concerned that all banks report their borrowing costs in various ways. I understand that customers find it difficult. Of course we must try to find a model that we all present more”, she told Svenska Dagbladet and believes that the responsibility lies of the Bankers' Association.

According to Svenska Dagbladet's so-called interest-map, fund rates are now falling at all banks - a consequence of lower borrowing costs. But according to Annika Falkengren there is no guarantee that interest rates will continue to fall. Instead, customers can count on a rise, partly because the Swedish authorities pressurised them to increase the capital adequacy requirements, writes Svenska Dagbladet.

"Right now it does not look like we will raise. We have good access to debt markets. But I can not promise anything to come. In the long term, I think that mortgages will become more expensive, "says Annika Falkengren to Svenska Dagbladet.

In effect, customer should pay for the banks being more transparent or that when mortgages are made simple customer should bare the brunt.

So far however, SEB has been the winner in the tug of war for mortgage customers in Swedish real estate market. In 2011, SEB was up to third place in terms of market share, after Swedbank and Handelsbanken. One crucial reason for SEB’s third place is price. According to analysts, SEB cheaper among the other banks with the average interest rate on a three-month loan in May being 3.45 percent, compared to 3.86 in state SBAB.

Annika Falkengren would not consent to the fact that SEB deliberately dumped prices in order to attract new customers. The influx of customers is more a consequence that in the competition,  Swedbank has become more restrictive, according to her.

“We have tried not to raise prices rather than lowering them. But it is gratifying that we are well placed in the Interest Map. We have tried to ensure that customers get the best possible price.”

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