4917_not-searchable
/en/bank-og-finansmarked/statistikker/orbofrent/kvartal
4917
Highest interest rate margin in 4 years
statistikk
2009-02-25T10:00:00.000Z
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, Q4 2008

Content

Published:

This is an archived release.

Go to latest release

Highest interest rate margin in 4 years

In the 4th quarter of 2008, the average interest rate margin in banks increased by 0.45 percentage points, to 2.66 per cent. The money market rate (NIBOR) decreased considerably in the same period.

Interest rate margin total and interest rate margin on loans. Q2 1986-Q4 2008

Interest rates on loans and deposits in banks, Norges Bank's key policy rate and the NIBOR rate. Q1 2004-Q4 2008

The average interest rate on loans from banks decreased from 7.80 per cent in the 3rd quarter of 2008 to 7.27 per cent in the 4th quarter of 2008. In the same period, the average interest rate on deposits decreased from 5.60 per cent to 4.61 per cent. As a result of this, the average interest rate margin increased from 2.21 per cent to 2.66 per cent. This is the highest average interest rate margin since the 4th quarter of 2004.

The development in banks' interest rates is affected by Norges Bank's key policy rate and the NIBOR rate. Note however that there is a time lag between changes in the money market rate and in the key policy rate and changes in banks’ interest rates. This time lag varies between the banks. Figures show that although the average interest rate margin increased in this period, almost half of the banks had a decrease in the interest rate margin.

Rise in interest rate margin on loans

The strong decrease in NIBOR in the 4th quarter resulted in an increased interest rate margin on loans of 3.41 percentage points and a decreased interest rate margin on deposits of 2.96 percentage points.

The interest rate margin on loans of 3.18 per cent at the end of the 4th quarter is the highest level for this margin since the 2nd quarter of 1993. The same margin was negative last period and at its lowest level since the 3rd quarter of 1992. This reflects the volatility in the money market.

There are several possible reasons for the increase in the interest rate margin. 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. It could also be argued that the banks are demanding a higher risk premium because of the financial turmoil.

Less decrease in the interest rate on loans in mortgage companies

In the 4th quarter of 2008, the interest rate on loans from mortgage companies decreased less than in banks. One reason is the transfer of loans from banks to mortgage companies and the establishment of new mortgage companies, as well as factors related to regulations concerning bonds with priority and the government's actions aimed at the financial crisis.

Rise in the interest rate on loans in state lending institutions

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. This helps to explain why these rates move in the opposite direction of the rates in other financial institutions. The average interest rate on loans from state lending institutions increased from 4.59 per cent at the end of the 3rd quarter to 4.95 per cent at the end of the 4th quarter.

The interest rate in state lending institutions may also change due to changes in the share of loans to students that are not subject to interest. If we exclude loans to students with a zero interest rate, the average interest rate on loans from state lending institutions increased from 5.40 per cent to 5.65 per cent from the 3rd to the 4th quarter.

1 Interest rates in financial corporations at the end of the quarter, Q4 2007-Q4 20081
 
  31.12.2008 30.09.2008 30.06.2008 31.03.2008 31.12.2007 Changes in interest rates Share of loans
  Last quarter Last year 31.12.2008 30.09.2008
 
Total loans from banks 7.27 7.80 7.41 7.00 6.65 -0.53 0.62 70.9 73.2
Total bank deposits 4.61 5.60 5.05 4.76 4.39 -0.99 0.22  100.0  100.0
Banks' interest rate margin (1-2) 2.66 2.21 2.37 2.24 2.26 0.45 0.40 . .
                   
Lending rate, mortage companies 6.45 6.86 6.44 6.11 5.63 -0.41 0.82 20.3 18.2
Lending rate, life insurance companies 5.57 6.51 6.30 5.78 5.82 -0.93 -0.24 1.1 1.0
Lending rate, state lending institutions 4.95 4.59 4.53 4.34 4.26 0.36 0.69 7.7 7.6
Lending rate, state lending institutions exsclusive loans with zero interest rates in the Norwegian State Educational Loan Fund 5.65 5.40 5.27 5.06 4.87 0.24 0.78 6.8 6.5
Total loans from financial corporations2 6.90 7.37 7.03 6.66 6.31 -0.47 0.59  100.0  100.0
                   
The Norwegian Public Service Pension Fund 6.39 6.39 5.87 5.61 5.09 0.00 1.30 . .
                   
Nibor (3 mnd. effective)3 4.09 8.03 6.83 6.35 6.10 -3.94 -2.01 . .
Deposit margin (8-2) -0.52 2.43 1.78 1.59 1.71 -2.96 -2.23 . .
Lending margin (1-8) 3.18 -0.22 0.58 0.65 0.55 3.41 2.63 . .
                   
Banks. Repayment loans secured on dwellings 7.12 7.44 7.05 6.72 6.35 -0.33 0.77 33.3 34.9
Banks. Credit lines secured on dwellings 6.86 7.23 6.87 6.51 6.10 -0.38 0.76 8.2 8.4
Banks. Lending margin repayment loans secured on dwellings (9-8) 3.03 -0.59 0.22 0.37 0.25 3.61 2.78 . .
Banks. Lending margin on credit lines secured on dwellings (10-8) 2.77 -0.80 0.04 0.16 0.00 3.56 2.77 . .
                   
Mortgage companies. Repayment loans secured on dwellings 6.91 7.37 6.93 6.58 6.23 -0.46 0.68 8.3 7.2
Mortgage companies Credit lines secured on dwellings 6.72 7.23 6.79 6.51 6.12 -0.52 0.60 3.5 2.7
Life insurance companiess. Repayment loans secured on dwellings 5.42 7.14 6.53 6.16 6.07 -1.72 -0.65 0.4 0.3
State lending institutions. Repayment loans secured on dwellings 5.09 4.86 4.78 4.66 4.52 0.23 0.56 2.8 2.8
                   
Financial corporations total: Repayment loans secured on dwellings 6.93 7.26 6.89 6.57 6.22 -0.33 0.71 44.8 45.2
Financial corporations total: Credit lines secured on dwelllings 6.82 7.23 6.85 6.51 6.10 -0.42 0.72 11.7 11.1
Housing loans total from financial corporations 6.91 7.26 6.89 6.56 6.20 -0.35 0.71 56.5 56.3
                   
Norges Banks foliorente 3.00 5.75 5.75 5.25 5.25 -2.75 -2.25 . .
Dagslånsrenten 4.00 6.75 6.75 6.25 6.25 -2.75 -2.25 . .
Lending rate, banks and mortgage companies 7.09 7.62 7.25 6.86 6.50 -0.53 0.59 91.2 91.4
 
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 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.

 

Tables

Published tables