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Declining interest rates and increasing interest rate margin
statistikk
2009-08-26T10:00:00.000Z
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 2009

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Declining interest rates and increasing interest rate margin

The interest rate on loans from financial corporations continued to fall in the second quarter of 2009. The interest rate on loans from banks and mortgage companies and the interest rate on deposits are now at about the same level as three years ago. The decline in the average interest rate on deposits was larger than the decline in the average interest rate on loans from banks. Hence the interest margin increased.

Interest rates on loans and deposits in banks, Norges Bank's key policy rate and the NIBOR rate. Q2 2005-Q2 2009

Interest rate margin total and interest rate margin on loans. Q2 2008-Q2 2009

The average interest rate on loans from banks fell by 0.78 percentage points (p.p.) to 4.47 per cent, while the interest rate on deposits fell by 0.90 p.p. to 4.47 per cent. Hence the interest margin increased by 0.12 p.p. to 2.50 per cent.

Increased interest rate margin on loans

The fall in interest rates is affected by the reduction in Norges Bank’s key policy rate by 0.5 p.p. on both 25 March and 6 May and to some degree also from the reduction of 0.25 percentage points on 17 June. In the same period, the money market rate (3 month NIBOR) fell by 1.04 percentage points. The interest rate margin on loans increased by 0.26 percentage points, while the deposit margin fell by 0.15 percentage points.

Transfer of housing loans to mortgage companies contributes to higher average interest rates on loans from banks

Banks continue to transfer housing loans from banks to mortgage companies and to establish new mortgage companies. These loans are used as security for these companies’ purchases of bonds with priority. A lower share of housing loans in banks’ lending portfolio leads to an increase in the average interest rate on loans from banks because interest rates on loans secured by dwellings are usually lower than interest rates on other loans. As such, the average interest rate on loans from both banks and new mortgage companies is 0.18 percentage points lower than the average interest rate on loans from banks only. The interest rate margin for both banks and new mortgage companies increased from 2.25 to 2.32 per cent from the first to the second quarter of 2009.

Interest rates at 2006 level

The interest rates on loans from banks and mortgage companies at the end of the second quarter 2009 were at about the same level as three years ago. The impact of the fall in the key policy rate on 17 June will mostly be reflected in the interest rate data for the third quarter. Hence the interest rates on bank loans and deposits may fall further in the third quarter.

Record low interest rates on loans from life insurance companies

The interest rate on loans from life insurance companies fell by 0.76 percentage points to 3.93 per cent. This is the lowest level of interest rate on loans from life insurance companies from the period for which we have observations (from quarter four 1985).

The interest rate on loans from state lending institutions and The Norwegian Public Service Pension Fund fell by 0.71 and 2.04 percentage points to 4.20 and 3.28 per cent respectively.

Interest rates in financial corporations. 2nd quarter 20092
 
  30.06.2009 31.03.2009 31.12.2008 30.09.2008 30.06.2008 Changes in interest rates Share of loans
  Last quarter Last year 30.06.2009 31.03.2009
 
Total loans from banks 4.47 5.25 7.28 7.80 7.41 -0.78 -2.94 66.8 69.0
Total bank deposits 1.97 2.86 4.61 5.60 5.05 -0.90 -3.08 0.0 0.0
Banks' interest rate margin (1-2) 2.50 2.38 2.67 2.21 2.37 0.12 0.13 0.0 0.0
                   
Lending rate, mortage companies 3.62 4.41 6.45 6.86 6.44 -0.79 -2.82 24.2 22.1
Lending rate, life insurance companies 3.93 4.69 5.57 6.51 6.30 -0.76 -2.38 1.3 1.1
Lending rate, state lending institutions1 4.20 4.91 4.95 4.59 4.53 -0.71 -0.33 7.7 7.7
Lending rate, state lending institutions exsclusive loans with zero interest rates in the Norwegian State Educational Loan Fund1 4.86 5.70 5.65 5.40 5.27 -0.84 -0.41 6.7 6.7
Total loans from financial corporations2 4.24 5.03 6.91 7.37 7.03 -0.79 -2.80  100.0  100.0
                   
The Norwegian Public Service Pension Fund 3.28 5.32 6.39 6.39 5.87 -2.04 -2.59 0.0 0.0
                   
NIBOR (3 month effective) 2) 2.00 3.05 4.09 8.03 6.83 -1.04 -4.83 0.0 0.0
Deposits margin (8 - 2) 0.03 0.18 -0.52 2.43 1.78 -0.15 -1.75 0.0 0.0
Loans margin (1 - 8) 2.47 2.20 3.19 -0.22 0.58 0.26 1.88 0.0 0.0
                   
Banks. Repayment loans with home mortgages 4.05 4.86 7.12 7.44 7.05 -0.82 -3.00 30.6 32.1
Banks. Credit loans with home mortgages 3.44 4.42 6.86 7.23 6.87 -0.98 -3.43 7.4 7.7
Banks. Loans margin repayment loans with home mortgages (9 - 8) 2.04 1.82 3.03 -0.59 0.22 0.23 1.82 0.0 0.0
Banks. Loans margin on credit loans with home mortgages 1.44 1.38 2.77 -0.79 0.04 0.06 1.40 0.0 0.0
                   
Mortgage companies. Repayment loans with home mortgages 3.60 4.49 6.91 7.37 6.93 -0.89 -3.33 11.0 9.5
Mortgage companies Credit loans with home mortgages 3.32 4.27 6.72 7.23 6.79 -0.95 -3.47 4.6 4.0
Life insurance companiess. Repayment loans with home mortgages 3.83 4.58 5.42 7.14 6.53 -0.75 -2.70 0.4 0.4
State lending institutions. Repayment loans with home mortgages 4.25 5.06 5.09 4.86 4.78 -0.81 -0.52 2.8 2.8
                   
Repayment loans secured on dwellings 3.95 4.79 6.93 7.26 6.89 -0.85 -2.94 44.9 44.8
Credit lines from financial corporations 3.39 4.37 6.82 7.23 6.85 -0.98 -3.46 12.0 11.7
Housing loans total from financial corporations 3.83 4.71 6.91 7.26 6.89 -0.87 -3.05 57.0 56.6
                   
Key policy rate3 1.25 2.00 3.00 5.75 5.75 -0.75 -4.50 0.0 0.0
Overnight lending rate3 2.25 3.00 4.00 6.75 6.75 -0.75 -4.50 0.0 0.0
Total loans from banks and mortgage companies 4.24 5.04 7.09 7.62 7.25 -0.80 -3.01 91.0 91.1
 
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.
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.

Definitions and other important information:

The interest margin: the difference between banks’ average lending and deposit rates

The lending margin: the difference between banks’ interest rates on loans and the NIBOR rate

The interest margin on deposits: The difference between the NIBOR rate and banks’ interest rates on deposits

 

By the end of the second quarter of 2009, the interest rate statistics encompassed three state lending institutions, five life insurance companies, 22 mortgage companies and 150 banks, plus The Norwegian Public Service Pension Fund.

 

The floating interest rate on loans from state lending institutions is determined by the interest rate on treasury bills three months before the decisions are made. The interest rate on loans from The Norwegian Public Service Pension Fund follows the official standard rate that is also determined by the interest rates on treasury bills, but with an observation period of two months only.

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