SBAB CEO Explains Why Mortgage Rates Can't Be Lowered Further Amid Political Pressure
SBAB CEO Mikael Inglander clarifies why mortgage rates cannot be reduced further despite political demands and SBAB's lower profit requirements compared to major banks.
- • SBAB has a lower profit requirement (10%) compared to major banks (around 15%) but mortgage rates remain similar.
- • Political criticism targets SBAB and other banks for insufficient mortgage rate cuts following the Riksbank's rate reduction.
- • Lowering profit requirements further could increase lending risk and potentially lead to higher borrowing costs.
- • Major banks have broader business models generating revenue from varied products, affecting their profitability and rate structures.
Key details
Following the recent interest rate cut by the Riksbank, SBAB has faced considerable political criticism for not lowering mortgage rates sufficiently. Finance Minister and other politicians have demanded that the state-owned mortgage bank should use its position to press lending rates down for consumers. However, SBAB CEO Mikael Inglander has explained several key reasons why further reductions in mortgage rates are not feasible.
Inglander pointed out that although SBAB has lower profit requirements from its owners—around 10% compared to approximately 15% for major banks—customers have not benefited from lower mortgage rates. He emphasized that lowering these profit requirements further would not be advantageous, as it could raise perceived risks among lenders, which might lead to higher borrowing costs in the long term.
He also noted that larger banks operate under fundamentally different business models. They generate substantial revenue from diverse products such as funds and card fees, which influences their profitability and rate-setting capabilities. Despite the recent interest rate cut, the drop in mortgage rates relative to the Stibor rate has been more significant than the decrease in banks' funding costs since interest rates started declining.
The recent political commentary reflects frustration that banks, including SBAB, have not fully passed on the Riksbank's rate reductions to mortgage customers. Still, Inglander underscored the complexity of balancing profitability, risk management, and benefits to borrowers in the mortgage market.
As the pressure mounts for banks to lower lending rates, SBAB remains cautious about further mortgage rate cuts, highlighting the risk that reducing profits excessively may jeopardize financial stability for lenders and might ultimately disadvantage borrowers.