Swedbank and Handelsbanken continue to dominate the mortgage market despite decreasing market shares, holding approximately 50% of the market. However, a recent analysis by Afv revealed that it is actually more expensive to borrow money from Nordea, one of the major banks.

For smaller players in the market, the superior distribution and financing channels of the major banks have made it challenging for other actors to break through. Nevertheless, some of the smaller players are joining forces and are poised to challenge the major banks with their new joint venture, Borgo Hypotek.

Just like the major banks, Borgo has access to deposits and multiple sources of financing. As of the latest data, the total mortgage volume at the mid-year mark was 33.7 billion SEK, corresponding to a market share of just under 1%. Despite experiencing 100% growth last year, Borgo ended up with a net interest income of -77 million SEK.

A Collaboration of Actors

Behind Borgo, a relatively new player in the market, are ICA Banken, Kamprandbanken, Ikano Bank, Ålandsbanken, Söderberg & Partners, and Sparbanken Syd.

“We have an aggressive growth plan that we aim to achieve by challenging the major banks’ high margins on mortgages,” said Erik Salzberg, the business manager at ICA Banken.

However, Borgo operates more in the background, with the respective brands acting as the face to customers for mortgage services.

“The brokers set the prices for customers, but Borgo makes credit decisions and acts as the lender,” explained Adam Lewenhaupt, Borgo’s marketing manager.

ICA Trades Grocery Bags for Lower Rates

For ICA Banken’s customers, the more they shop at ICA, the better interest rates they receive.

A customer who spends over 6000 SEK per month at ICA can have their interest rate reduced by up to 50 basis points. On a loan of 15 million SEK with 50% leverage, this translates to approximately 2800 SEK lower cost per month before tax deductions. “We have taken a comprehensive approach to everyday economics where the major cost items for ordinary customers, such as housing, food, insurance, pharmacy, and health, provide better mortgage rates. The combined value proposition ensures that customers have more money left in their wallets,” said Erik Salzberg at ICA Banken.

With high inflation and rising interest rates looming, the mortgage market has been even slower than usual. However, there has been a slight trend reversal this year, with increased activity and a greater demand for mortgages. The question is, what will mobility look like?

Everyone Deserves “Fair Terms”

“We believe that everyone should have the opportunity for fair terms with clear and transparent pricing, which is why our mortgage rates are set based on the loan-to-value ratio. On the website, you can see the rate you will receive directly, as it is pre-negotiated and clear,” said Katarina Erichs Emilson, Ikano Bank’s communications manager.

Ikano Bank has a similar setup to ICA Bank, where members, in this case, IKEA members, receive better mortgage rates.

Similar to ICA Bank, Ikano Bank’s customers can borrow up to 85% of the property’s value. However, one should be cautious of fees that may result in a slightly higher effective rate than initially perceived.

A comparison between these two actors shows that Ikano Bank’s customers have received slightly lower rates in both 2022 and 2023, while ICA Bank’s customers have been able to borrow more affordably this year.

Landshypotek Offers Affordable Mortgages

Even cheaper is borrowing through Landshypotek, which is owned by 34,000 farmers and foresters. The bank truly stands out even in comparison to the major banks and other smaller, yet relatively larger, challengers like Skandiabanken and LF Bank.

“We have begun establishing ourselves as a significant challenger, with open and negotiation-free rates being a central part of what many appreciate. We and a few other challenger banks are charting a new path here. Recently, we have lent nearly 27 billion SEK in mortgages to customers across the country,” said Catharina Åbjörnsson Lindgren, the mortgage business manager at Landshypotek.

In August of this year, Landshypotek’s average variable loan rate was 4.15%. It is cheaper than any other actor Afv has examined.

“The major banks used their deposit money and had a competitive advantage for a while, but now, as interest rates have fallen, we have returned to the previous order, and we have also led Riksbank’s rate cuts on several occasions. Since the turn of the year, we have lowered the list price on the 3-month rate more than both the Riksbank and most competitors,” said Catharina Åbjörnsson.

Limited Loan-to-Value Ratio

However, there is a catch. If you need to borrow up to the mortgage ceiling of 85%, you cannot do so.

“When we started with mortgages and were new to the mortgage market, we chose to limit the loan-to-value ratio to 75%. We are constantly evaluating how we can develop our business to best meet the needs of customers. The loan-to-value ratio we choose is part of that evaluation. Right now, we have a high demand for our mortgages and see that more and more customers are finding us,” said Catharina Åbjörnsson.

Mortgage Funds Aim to Attract Customers

Other players vying for a share of the mortgage market are Stabelo with high-profile owners like H&M’s Stefan Persson, Creades, and Brummer’s Kent Janér, and Schibsted-owned Hypoteket. These two actors have a financing model that differs from most others, making it more challenging for them. The money invested by pension funds like Folksam, SPP, and Alecta is placed in a mortgage fund from which money is lent to mortgagees. However, without secured bonds and without financing in the form of deposits, the model has its weaknesses.

The difference between Hypoteket and Stabelo is that Hypoteket lends up to 75% while Stabelo, for now, can only lend a maximum of 60% of the property’s value. With a higher loan-to-value ratio, the risk in the mortgage portfolio increases, leading to higher return requirements, which means that Hypoteket’s rates are slightly higher than Stabelo’s, as shown by Afv’s analysis. However, it is primarily the major banks that Hypoteket aims to challenge.

“The rapid interest rate hikes during 2023-2024 have favored actors with significant deposits who have seen their margins on mortgage business more than halved but compensated through delayed or omitted interest rate increases on their customers’ savings and transaction accounts. However, we do not believe that the banks will accept lower revenues on their mortgage business over time,” said Hypoteket’s CEO Carl Johan Nordquist.

Online Brokers Join the Price War

Online brokers Avanza and Nordnet are also involved in the price war. However, the interest rate size depends on the amount of savings you have.

Nordnet offers the absolute lowest rate to borrowers with 15 million SEK in combined savings, including any company pension.

If you manage to accumulate this amount, the rates are truly advantageous, though not always the cheapest.

For clients with capital under 5 million, Nordnet refers them to Stabelo. Similarly, Avanza, in addition to Stabelo, also markets Landshypotek to its customers.

“Our own mortgage is only aimed at Private Banking clients and the interest rate is directly linked to the policy rate. Then you get a discount depending on how much savings you have with us,” says Avanza’s communication chief Sofia Svavar. She points out that Avanza only lends out a small part of its deposits and has a limited amount to lend out for housing.

This strategic move by Nordnet and Avanza reflects a growing trend in the financial industry where digital platforms are partnering with specialized mortgage providers to offer a wider range of services to their clients. By leveraging the expertise of companies like Stabelo and Landshypotek, these online brokers can cater to the diverse needs of their customers while maintaining a focus on their core competencies.

Stabelo, for example, prides itself on providing personalized mortgage solutions tailored to each client’s unique financial situation. By working closely with Nordnet and Avanza, Stabelo can offer competitive rates and flexible terms that may not be available through traditional lenders. This partnership not only benefits the customers by providing them with more options for financing their homes but also strengthens the overall value proposition of Nordnet and Avanza as comprehensive financial service providers.

In the competitive landscape of the financial industry, differentiation is key to attracting and retaining customers. By teaming up with specialized mortgage providers like Stabelo and Landshypotek, Nordnet and Avanza are able to offer a more holistic approach to financial planning, which can help set them apart from their competitors. This strategic collaboration allows these online brokers to tap into new markets and customer segments, ultimately expanding their reach and solidifying their position as market leaders in the industry.

Moreover, by diversifying their product offerings and partnering with trusted mortgage providers, Nordnet and Avanza are able to create a more robust and resilient business model. In an ever-changing economic landscape, having multiple revenue streams and strategic partnerships can help these companies weather any challenges that may arise. This forward-thinking approach not only benefits the companies themselves but also the customers who rely on them for their financial needs.

As the financial services industry continues to evolve, partnerships like the one between Nordnet, Avanza, Stabelo, and Landshypotek will become increasingly common. By collaborating with specialized providers, online brokers can enhance their service offerings, provide more value to their customers, and stay ahead of the curve in a rapidly changing market. This innovative approach to financial services not only benefits the companies involved but also the consumers who stand to gain access to a wider range of products and services tailored to their specific needs.

In conclusion, the partnership between Nordnet, Avanza, Stabelo, and Landshypotek represents a strategic move towards offering more comprehensive and personalized financial solutions to customers. By leveraging the expertise of specialized mortgage providers, these online brokers are able to enhance their value proposition, differentiate themselves in a crowded market, and ultimately provide a better experience for their clients. This collaboration not only benefits the companies involved but also the customers who can now access a wider range of financial products and services to meet their individual needs.

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