Norway: Many banks are experiencing an increase in applications for deferred loan payments
NordenBladet – Many banks in Norway, including Sparebank 1 Nord-Norge, DNB, and Nordea, are experiencing an increase in applications for deferred loan payments, also known as “avdragsfrihet.” This surge in requests is due to concerns about rising loan costs caused by recent interest rate hikes.
Deferred loan payments allow borrowers to pay only the costs associated with having a loan and postpone the repayment of the principal amount. It’s intended as a temporary solution to help borrowers navigate financially challenging periods.
Stein Vidar LoftĂĄs, Chief Communications, Community, and Sustainability Officer at Sparebank 1 Nord-Norge, noted an increase in the number of avdragsfrihet applications. He explained that some borrowers who are in generally stable financial situations may need temporary relief when unexpected expenses arise, such as car repairs or appliance replacements.
One individual, Runar, sought avdragsfrihet to manage increased loan costs resulting from recent interest rate hikes. He initially requested this option to have more financial flexibility during a challenging period but found it especially helpful as interest rates continued to rise.
High loan costs have become a concern for many borrowers in Norway due to interest rate hikes. Kjersti Haugland, Chief Economist at DNB, explained that avdragsfrihet is one way for borrowers to shield themselves from the impact of higher interest rates. However, she emphasized that borrowers can also consider refinancing their loans or extending their loan terms as options to mitigate the effects of rising rates.
While avdragsfrihet can provide temporary financial relief, it’s essential to understand that it postpones loan repayment rather than reducing the total amount owed. Financial institutions, such as Nordea, have reported a significant increase in avdragsfrihet requests, with contributing factors being post-holiday credit card bills and an uptick in divorces.
Despite the increase in applications, many borrowers have prepared for tougher economic times and have established financial buffers. LoftĂĄs noted that most borrowers have calculated their financial limits to be higher than current conditions, indicating that the rise in interest rates may not have drastic consequences for the average borrower. When faced with financial challenges, individuals often make adjustments by cutting non-essential expenses or postponing luxury purchases before considering changes to their home loans.
Rising interest rates in Norway have led to an increase in avdragsfrihet requests from borrowers looking for temporary relief from higher loan costs. While this option can provide short-term financial flexibility, borrowers should carefully consider their financial situation and explore other alternatives, such as loan refinancing or extending loan terms, to manage the impact of interest rate hikes.
Featured image: DBN Bank in Stavanger, Norway (NordenBladet)
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