Swedish people continue to save at record levels but earning low due to banks’ hawkish rate policy. A price way may be on the way.

Monday, 04 June 2012
Swedish people are not spending. They tend to carry out an almost synchronised model of increased saving meaning that domestic consumption is expected to be lower. How this affects production remains to be seen.

According to reports, the increased was accounted to have risen by Skr100 billion in a year meaning that the Swedes are saving more than ever. Meanwhile, much money stands on accounts with low interest rates. According SBAB, the state owned mortgage bank, customers who switch banks or accounts could generate the Swedish household some Skr15 billion in gains.

As the economy continues to remain uncertain it has allowed more Swedish people to save more than ever in banks. Household savings increased by Skr100 billion last year according to new statistics from statistic Sweden (SCB). And in April this year, the Swedes have a total of Skr1161 billion on their savings accounts which is a new record.

But unlike mortgages, where competition is fierce among financial institutions, there are still big differences when it comes to saving.
“There is much to do when it comes to competition in the savings market, says the state mortgage lender SBAB's chief economist Tor Borg and cites the examples of just saving rates.

SBAB dropped interest some time ago which started a price war on mortgage rates forcing big banks to follow. The result was lower margins for the banks and declining mortgage rates for customers.

Now, SBAB has kick-start a price war in the savings rates. The savings market is dominated by the four major banks in Sweden and the average interest rate on savings is around 1.5 percent, while a number of niche banks now pay twice as much: 3 percent or more.

It may not sound that much. But if all Swedes had moved their savings to niche banks, the Swedish population would have earned Skr15 billion in just the last year, according to SBAB's calculations. That means an average of Skr1500 for every Swedish person.

That amount is so much mainly because the big banks do not give any interest on their regular customers’ salary accounts and also because interest rates on many savings accounts in the banks are low.
“There is a long tradition for the big banks that have many customers who deposit money in their savings accounts which they allow it to sit there and not care so much about interest rates,” said Tor Borg.
By Scancomark.se Team

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