Swedish banks divided over Riksbank interest rate hike timing

Major Swedish banks have revised their economic forecasts upward, though they remain divided on the timing of interest rate hikes by the Riksbank. While most banks agree on the eventual target rate, the disagreement centers on whether a hike will occur as early as November this year or be delayed until spring 2026.

Danske Bank, Nordea, and Swedbank all anticipate an initial rate increase in November, driven by factors such as a weak krona, rising freight prices, and delayed effects from conflicts in the Middle East. Swedbank, which previously projected rates would remain unchanged until 2028, now expects hikes in November and February to reach 2.25 percent.

In contrast, SEB and Handelsbanken predict that the Riksbank will leave rates untouched throughout 2026, with normalization only beginning in March 2027. SEB's chief economist noted strong growth prospects for 2027, suggesting the Swedish recession has concluded.

Concurrently, the cost of fixed-rate mortgages has risen significantly. Long-term market rates are at multi-decade highs, making fixed-rate loans more expensive than variable-rate options. For a household with a 3 million SEK mortgage, choosing a 7-year fixed rate over a variable rate could result in an additional 3,900 SEK in monthly costs.