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/en/bank-og-finansmarked/statistikker/orbofrent/kvartal
4919
Negative interest margin on loans
statistikk
2008-11-27T10:00:00.000Z
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, Q3 2008

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Negative interest margin on loans

Banks’ interest rate on loans increased less than the money market rate in the third quarter. This resulted in negative interest rate margins on loans and the lowest level since the third quarter in 1992. Banks’ total interest rate margin also fell in the 3rd quarter this year.

Interest rates on loans and deposits in banks, Norges Bank's key policy rate and the NIBOR rate. Q2 2004-Q3 2008

The average interest rate on loans from banks increased by 0.39 percentage points to 7.81 per cent in the third quarter of 2008, while the deposit rate increased by 0.55 percentage points to 5.60 per cent. Hence the interest margin fell by 0.16 percentage points to 2.21 per cent. This was a reversal from last quarter when the interest rate margin increased by 0.13 percentage points.

The money market rate (NIBOR) which was fairly stable from the end of the second quarter to 17 September, increased strongly at the end of the quarter. The interest rate data reflects banks’ adjustments of their lending and deposit rates to the increase in the key policy rate on 25 June 2008. The effect of the banks’ adjustments to the increase in the money market rate at the end of September this year will be incorporated in the interest figures for the fourth quarter.

Large fall in banks’ loan margins

Banks’ margin on loans (the margin between banks’ average interest rate on loans and the money market rate) fell by 0.80 percentage points in the third quarter of 2008 to -0.22 per cent; the lowest level since the third quarter of 1992. The corresponding interest margin on repayment loans and credit loans with a mortgage fell by 0.81 and 0.83 percentage points respectively to -0.59 and -0.80 percentage points in the third quarter this year. Banks’ deposit rate (the difference between NIBOR and the average deposit rate) increased by 0.65 percentage points to 2.43 per cent in the same period.

Interest rate margin total and interest rate margin on loans and deposits. Q1 2004-Q3 2008

Transfer of loans contributes to larger interest rates in mortgage companies

In the third quarter of 2008, the interest rate on loans from mortgage companies increased more than in banks. This may be due to a transfer of loans from banks to mortgage companies and the establishment of new mortgage companies, as well as factors related to the new regulations concerning bonds with priority and the government’s actions against the financial unrest. Loans from mortgage companies to the general public increased by 0.21 percentage points, while the corresponding loans from banks fell by 2 per cent in the same period.

The average interest rate on loans from state lending institutions and life insurance companies increased less than in banks in the third quarter this year.

Rise in net interest earnings despite lower interest margin

Although the banks’ interest margin fell in the third quarter of 2008, their net interest earnings (interest income less interest costs) in the profit and loss accounts increased. The increase was primarily due to increased interest income and other income on loans and receivables from customers and credit institutions caused by a continued high growth rate in loans and a higher interest rate.

Interest rates in financial corporations at the end of the quarter, Q3 2007-Q3 20081
 
  30.09.2008 30.06.2008 31.03.2008 31.12.2007 30.09.2007 Changes in interest rates Share of loans
  Last quarter Last year 30.06.2008 31.03.2008
 
Total loans from banks 7.81 7.41 7.00 6.65 6.11 0.39 1.70 73.2 76.2
Total bank deposits 5.60 5.05 4.76 4.39 3.92 0.55 1.68  100.0  100.0
Banks' interest rate margin (1-2) 2.21 2.37 2.24 2.26 2.19 -0.16 0.02 . .
                   
Lending rate, mortage companies 6.86 6.44 6.11 5.63 5.18 0.42 1.67 18.2 15.2
Lending rate, life insurance companies 6.51 6.30 5.85 5.82 5.42 0.20 1.08 1.0 0.9
Lending rate, state lending institutions 4.59 4.53 4.34 4.26 3.90 0.06 0.69 7.6 7.7
Total loans from financial corporations2 7.38 7.03 6.66 6.31 5.81 0.34 1.56  100.0  100.0
                   
The Norwegian Public Service Pension Fund 6.39 5.87 5.61 5.09 4.83 0.52 1.56 . .
                   
Nibor (3 mnd. effective)3 8.03 6.83 6.35 6.10 5.89 1.20 2.14 . .
Deposit margin (8-2) 2.43 1.78 1.59 1.71 1.97 0.65 0.46 . .
Lending margin (1-8) -0.22 0.58 0.65 0.55 0.22 -0.80 -0.45 . .
                   
Banks. Repayment loans secured on dwellings 7.44 7.05 6.72 6.35 5.78 0.39 1.66 34.9 37.9
Banks. Credit lines secured on dwellings 7.23 6.87 6.51 6.10 5.48 0.37 1.75 8.4 8.1
Banks. Lending margin repayment loans secured on dwellings (9-8) -0.59 0.22 0.37 0.25 -0.11 -0.81 -0.48 . .
Banks. Lending margin on credit lines secured on dwellings (10-8) -0.80 0.04 0.16 0.00 -0.41 -0.83 -0.39 . .
                   
Mortgage companies. Repayment loans secured on dwellings 7.37 6.93 6.58 6.23 5.68 0.44 1.68 7.2 4.9
Mortgage companies Credit lines secured on dwellings 7.23 6.79 6.51 6.12 5.53 0.44 1.70 2.7 2.2
Life insurance companiess. Repayment loans secured on dwellings 7.14 6.53 6.16 4.82 4.22 0.61 2.92 0.4 0.3
State lending institutions. Repayment loans secured on dwellings 4.86 4.78 4.66 4.52 4.39 0.08 0.47 2.8 2.9
                   
Financial corporations total: Repayment loans secured on dwellings 7.26 6.89 6.57 6.22 5.69 0.37 1.57 45.3 45.9
Financial corporations total: Credit lines secured on dwelllings 7.23 6.85 6.51 6.10 5.49 0.38 1.75 11.1 10.2
Housing loans total from financial corporations 7.26 6.89 6.56 6.20 5.66 0.37 1.59 56.4 56.1
                   
Norges Banks foliorente 5.75 5.75 5.25 5.25 5.00 0.00 0.75 . .
Dagslånsrenten 6.75 6.75 6.25 6.25 6.00 0.00 0.75 . .
 
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 the money market 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 rate in state lending institutions may also change due to changes in the share of loans to students that don’t pay interest.

 

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.

 

The banks’ net interest earnings is the difference between income and expenditures on interest rates on loans and deposits, other assets, other liabilities and securities debt and securities holdings.

 

Tables

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