Interest rates on loans near the bottom
The interest rate on loans from financial corporations continued to fall in the third quarter of 2009. The interest rate on loans from mortgage companies, life insurance companies and The Norwegian Public Service Pension Fund has reached the lowest level ever observed. The interest margin on loans fell while the total interest rate margin was almost unchanged.
The average interest rate on loans from banks fell by 0.21 percentage points (p.p.) to 4.19 per cent, while the interest rate on deposits fell by 0.20 p.p. to 1.70 per cent in the third quarter of 2009. Hence the interest margin fell by 0.01 p.p. to 2.49 per cent. The interest rate on loans from banks was slightly higher than the record low level in the second quarter of 2009 when the interest rate was only 3.82 per cent. Transfer of loans to new mortgage companies, however, led to higher interest rates on loans from banks. The interest rate on loans from banks and new mortgage companies thereby fell from 4.23 to 3.99 per cent from the second to the third quarter of 2009. The interest rate margin for banks and new mortgage companies fell from 2.33 to 2.29 per cent.
Lower interest margin on loans and increased deposit margin
The money market rate (3 month NIBOR) was only 0.02 p.p. lower at the end of the third quarter 2009 than at the end of the previous quarter. The interest margin on loans thereby fell by 0.19 p.p., while the deposit margin increased by 0.18 p.p. The fall in interest rates in the third quarter is affected by the reduction in Norges Bank’s key policy rate by 0.25 p.p. on 18 June to the record low level of 1.25 per cent. From 29 October, however, the key policy rate was increased by 0.25 p.p.
Low interest rates on loans in other financial institutions
The interest rate on loans from mortgage companies and life insurance companies fell by 0.27 and 0.24 percentage points respectively to 3.35 and 3.69 per cent. This is the lowest level of interest rate on loans from life insurance companies from the period for which we have observations. The interest rate on loans from state lending institutions and The Norwegian Public Service Pension Fund fell by 1.21 and 1.02 percentage points to 3.65 and 2.26 per cent respectively. This is the lowest level of interest rate on loans from The Norwegian Public Service Pension Fund ever. At the end of the third quarter 2009 the interest rate on housing loans from banks, mortgage companies and life insurance companies was slightly higher than the record low in the second quarter of 2005.
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