In recent days, there has been much talk about a new requirement for the banks from Bank. This requirement applies to mortgage rates and that all banks must report the average interest rate their customers have received. The reason for this is that the interest rates that they now present (list interest rates) are misleading and do not correspond to what people actually receive in mortgage rates.
As I said, a lot has been written about this new demand for average interest rates from FI in recent days
This is a pretty big change, as you are abandoning the old system of so-called list rates and moving towards greater openness. The result is that people can more easily get information about what interest rate they can really expect to get after they have negotiated and talked to the bank.
In the future, customers will not have to grope blindly, as they have almost done before. Up until now, everyone has had different conditions depending on how they are invested in this with mortgages, how much can be imagined and what is a reasonable interest rate. FI does not want the mortgage rate to be determined by how good you are at negotiating with the bank and that people should feel that they do not know where the real interest rate level actually is.
So far, banks have not been so keen on adopting this structure and many banks are still holding out on average interest rates, although a decision is expected soon to say that they must be presented. The new rule comes into effect from March 1, 2015, says FI itself, which gives the banks a while to prepare for the big change. One bank that has already begun to show the average interest rate is Skandiabanken (which they get a credit for) and hopefully other banks are on track to follow their example fairly soon.
The average interest rate shows what others have received for interest
The average interest rate that the banks are to show is an average of what other customers have received for interest from a particular bank, for example during the past month. The banks print such interest rates to see what people usually get for interest after discounts and when you have negotiated and so on. Then you do not have to try to negotiate with blindfolds without really knowing what you should have for goals and what is reasonable to expect.
Which interest rate you ultimately get depends on a number of different things, basic things like what you choose for loan amount and loan ratio, how your finances look and if you choose to collect your bank transactions with the bank where you want your mortgage, etc. You may not get exactly the same as the average interest rate, but you have at least one guideline so that you have something to assume when you sit down and talk to the bank with your mortgage.
Thus, it is soon better position than ever to negotiate their mortgage. Many have already done this before, but unfortunately many have been a bit poor at negotiating and bargaining. Now that you can see what big differences there are between interest rates and the real interest rates people get after negotiations, there are no excuses not to talk to the bank to get the best possible interest rate.
The banks themselves will probably also be more receptive to this because they know that the customers now know what opportunities are available to negotiate their mortgage rates. Interest rates will probably be pushed down a lot in general in the near future as more and more banks switch to showing average interest rates. They have until March 1 next year to implement the changes, but hopefully things are going much faster than most. No one wants to be the last to implement such an important change.
Now we can compare mortgages for real
Previously, it has been possible to compare mortgages at various banks by looking at what offers for interest rates for, for example, three months, one year and so on. Of course, it is not impossible to compare interest rates in this way and it gives a certain picture of which banks are a little cheaper, but it has nevertheless been difficult to know where the different banks really are.
However, with the new rules on presenting the average interest rates for its customers, it is clearly easier to compare different banks fairly. The average interest rates will show what people have really received for interest after negotiations and discounts and what you can expect to end up on your own. Today, it is conceivable that the banks that have the lowest interest rates are not necessarily the ones who give their customers the lowest interest rates in the end. Other banks may be easier to negotiate with or have better discounts.
When comparing mortgages and mortgage rates, you obviously do not want to look at a bunch of half-insignificant numbers (which the list rates actually are) but you want to know what you can actually get for interest rates. With the help of the new average interest rates, people can look at the interest rates that previous customers actually managed to get, and they can then compare between different banks to see which in the end actually offer the best interest rates.
We are moving towards more openness and “customer friendliness”
One can understand, of course, in part why the banks do not want to print their average interest rates in the way that they will soon have to do. The list interest rates that they are now showing are a good bit higher than the average interest rate will eventually end up, and therefore they can many times succeed in getting people to pay higher interest rates than they could possibly get. It is thus partly a matter of money and profit.
The large banks, such as Swedbank, point out that it would be a little too difficult to compare interest rates for so many different mortgage customers across the country and who have so very different conditions both with where they live and their finances etc. An average interest rate would not be fair to all, they say. Maybe it can to some extent be the general meeting, even though not everyone can get the same interest rate, it still feels good that the banks are forced to report an average interest rate.
The average interest rate can serve as a benchmark for those who want to obtain a mortgage and even though everyone cannot get really low interest rates, at least you know what to aim for. In addition, it creates a dialogue about why you get the interest rate you get (and why you might not get as low interest rates as some others). FI also wants to force the banks to do just that – to tell customers what exactly affects their interest rates. You will thus be able to get a better idea of what determines the mortgage rate and in this way you can also learn what you may need to do in order to get a lower interest rate in the future.
Forcing banks to be more open is good. They often do not want to be this open and it takes a long time to make changes for increased transparency. Thanks to initiatives like this, it will be better for customers and the “fight” against the big bank if a nice mortgage interest rate becomes a little easier. It is a fairly large change that can to some extent kill the current system of list rates, but it is probably just a positive effect.