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How Swedish banks are making a living on mortgage businesses
Thursday, 24 May 2012
Banks are earning twice as much on the mortgage loan as on other
banking activities. The margins are increasing and are back at the same
level it was before the financial crisis. Thus, there is plenty of room
for bargain on mortgage rates, according to a recent report.
Swedish Financial Supervisory Authority (FI) writes that “It is
difficult for customers to know what they are paying for today as banks
are not clear in showing. We want to contribute to the clarity, 'said
Martin Andersson, Director General ofFinancial to Swedish Radio on
is thus a clear negotiating room for mortgage customers. The margins
between the customer's mortgage rate and the funding costs have
increased and are now 1.1 percentage points, writes Financial
Supervisory Authority (FI) in the report.
Given the banks' other charges remains a margin of 0.4 percentage
points. It offers a return on equity of 22 percent, significantly more
than the banks' total returns, writes FI.
“As the banks need larger buffers at the same time we must not
surreptitiously offload the cost onto customers. The owners must also
take a large share of the cost price,” says Martin Anderson.
For an average mortgage customer in Stockholm with a loan of Skr1.5 million equivalent margin Skr6000 a year.
According to FI Swedish mortgage customers negotiate and it could on average reduce their rate by 0.2 percentage points.
While FI notes that there is an opportunity to negotiate down their
mortgage rates underlines also the importance of the customers are
aware of the costs they pay to other bank services and products.
“Clarity has become worse as the link between risk bank rate and
mortgage rates have declined. Banks' costs have increased but the
margins have increased even more, says Martin Andersson to radio Sweden.
By Scancomark.se Team
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