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4921
Large increase in bank interest rate margin
statistikk
2008-08-28T10:00:00.000Z
Banking and financial markets
en
orbofrent, Interest rates in banks and other financial enterprises, interest rates, interest on loans, deposit rates, interest margins, banks, mortgage companies, state lending institutions, life insurance companies, Norwegian Public Service Pension FundFinancial institutions and other financial corporations, Banking and financial markets
false

Interest rates in banks and other financial enterprises, Q2 2008

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Large increase in bank interest rate margin

Banks’ interest rate margin increased strongly in the second quarter of 2008, and is now at the highest level since the fourth quarter of 2005. The increase in the interest rate on loans from banks and in the deposit rate was lower than the increase in the money market rate.

Interest rates on loans and deposits in banks, Norges Bank's key policy rate and the NIBOR-rate. Q2 2004 - Q2 2008

Interest rate margin total and interest rate margin on loans and deposits. Q1 2004 - Q2 2008

The average interest rate on loans from banks increased by 0.41 percentage points to 7.41 per cent in the second quarter of 2008, while the deposit rate increased by 0.28 percentage points only to 5.04 per cent. Hence the interest margin increased by 0.13 percentage points to 2.37 per cent.

 

Interest rates in banks increased less than the money market rate (NIBOR) which showed an increase of 0.48 percentage points. Banks have adjusted their lending and deposit rates to the increase in the key policy rate in March 2008 and to some extent to the increase at the 28th of May.

The banks’ average interest margin on loans fell in the period 2004 - 2006, but has increased in 2007 and 2008. Most banks increased their interest rate margins last quarter.

The interest margin on loans (the margin between the banks average lending rate and the money market rate) fell by 0.07 percentage points in the second quarter 2008 after an increase in the two preceding quarters. The interest margin on repayment loans and credit lines secured on dwellings fell by 0.15 and 0.12 percentage points respectively to 0.22 and 0.04 percent in the second quarter of 2008. The deposit margin (the difference between the money market rate and the deposit rate) increased by 0.12 percentage points.

Interest rate on transaction accounts. Wage earners. Q4 2001 - Q2 2008

The interest rate on deposits from wage earners increased by 0.19 percentage points in the second quarter, while the interest rate on deposits from non-financial private companies, municipalities and non-financial public enterprises increased by 0.37, 0.36 and 0.42 percentage points respectively.

Transaction accounts covers payments that can be carried out without extra costs except usual transaction charges. The average interest rate on loans from wage earners was almost unchanged last quarter, while one third of the banks had a decrease in this interest rate. One explanation for the decrease in many banks’ interest rate on wage earners transaction accounts may be disbursement of vacation allowance and repayment of tax money to wage accounts that pays low interest rates. Another explanation may be that some banks reduce the interest rates on wage accounts and adjust the interest rate intervals in order to compensate for lower charges. The interest rate on transaction accounts from wage earners has changed less than the interest rate on other deposits in the period we have collected these data.

Lower increase in interest rate in mortgage companies and state lending institutions

In the second quarter of 2008, the interest rates on loans from mortgage companies and state lending institutions increased less than the interest rates on loans from banks. The relatively low increase in interest rates on loans from mortgage companies may be due to the new regulations concerning bonds with priority. Many banks have transferred parts of their most secured housing loans to mortgage companies (within the same financial concern/group). This has resulted in a lower share of loans with fixed interest rates.

Interest rates in financial corporations Q2 2007-Q2 20081
 
  30.06.2008 31.03.2008 31.12.2007 30.09.2007 30.06.2007 Share of loans
  30.06.2008 31.03.2008
 
Total loans from banks 7.41 7.00 6.65 6.11 5.58 76.3 77.2
Total bank deposits 5.04 4.76 4.39 3.92 3.36    
Banks' interest rate margin (1-2) 2.37 2.24 2.26 2.19 2.22    
               
Lending rate, mortage companies 6.44 6.11 5.63 5.18 4.74 15.2 14.1
Lending rate, life insurance companies 6.36 5.87 5.82 5.42 5.08 0.8 0.8
Lending rate, state lending institutions 4.53 4.34 4.26 3.90 3.65 7.7 7.9
Total loans from financial corporations2 7.03 6.66 6.31 5.81 5.31  100.0  100.0
               
The Norwegian Public Service Pension Fund 5.87 5.61 5.09 4.83 4.31    
               
Nibor (3 mnd. effective)3 6.83 6.35 6.10 5.89 5.01    
Deposit margin (8-2) 1.79 1.59 1.71 1.97 1.65    
Lending margin (1-8) 0.58 0.65 0.55 0.22 0.57    
               
Banks. Repayment loans secured on dwellings 7.05 6.72 6.35 5.78 5.26 37.9 39.9
Banks. Credit lines secured on dwellings 6.87 6.51 6.10 5.48 4.96 8.1 7.7
Banks. Lending margin repayment loans secured on dwellings (9-8) 0.22 0.37 0.25 -0.11 0.25    
Banks. Lending margin on credit lines secured on dwellings (10-8) 0.04 0.16 0.00 -0.41 -0.05    
               
Mortgage companies. Repayment loans secured on dwellings 6.93 6.58 6.23 5.68 5.08 4.9 4.2
Mortgage companies Credit lines secured on dwellings 6.79 6.51 6.12 5.53 5.01 2.2 1.5
Life insurance companiess. Repayment loans secured on dwellings 6.53 6.16 6.07 4.82 4.22 0.4 0.3
State lending institutions. Repayment loans secured on dwellings 4.78 4.66 4.52 4.39 4.21 2.9 3.0
               
Financial corporations total: Repayment loans secured on dwellings 6.89 6.57 6.22 5.69 5.18 46.0 47.4
Financial corporations total: Credit lines secured on dwelllings 6.85 6.51 6.10 5.49 4.96 10.2 9.2
Housing loans total from financial corporations 6.89 6.56 6.20 5.66 5.16 56.3 56.6
               
Norges Banks foliorente 5.75 5.25 5.25 5.00 4.50    
Dagslånsrenten 6.75 6.25 6.25 6.00 5.50    
 
1  Weighted average interest rates incl. commissions on NOK loans from banks and other financial corporations. Weighted average interest rates on
deposits in banks from non-financial enterprises, households and local government 1). Weighted average interestmargins in banks. Per cent per annum.
2  Includes banks, mortgage companies, life insurance companies and state lending institutions. The Norwegian Public Service Pension Fund is not included.
3  Norges Bank.

The development in banks’ interest rates is affected by Norges Bank’s key policy rate and the NIBOR rate. Pursuant to the Financial Contracts Act, banks are obliged to give notice to customers of interest rate changes six weeks in advance. As a result, there is often a delay between changes in Norges Bank’s key policy rate and changes in the banks’ interest rates on loans and deposits.

 

In state lending institutions, the interest rates on loans are adjusted less frequently than in commercial financial corporations. The Norwegian State Housing Bank and the Norwegian State Educational Loan Fund’s interest rate on loans follows the market rates, but with a three to six-month delay. In addition, a higher share of loans from state lending institutions is fixed-interest loans.

 

The interest margin is the difference between banks’ average lending and deposit rates. The lending margin is defined as the difference between banks’ interest rate on loans and the NIBOR rate. The interest margin on deposits is defined as the difference between the NIBOR rate and banks’ interest rate on deposits. Banks’ net interest income is defined as interest income less interest expenses in the profit and loss accounts.

 

Transaction accounts comprise payments that can be carried out directly. Transaction accounts covers accounts that can by used for payments by cheque, card, phone, internet bank and other payments without any other costs than usual transaction charges.


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