Swedbank and Handelsbanken may have decreased market shares, but they still dominate the mortgage market with about 50% market share. Despite this, the average interest rates offered by major banks are not always the cheapest. A recent study by Afv revealed that borrowing money from Nordea is the most expensive.
For smaller players, the superior distribution and financing channels of major banks have made it difficult for other actors to break through. However, some of the smaller players are now joining forces and are expected to challenge the major banks with their new joint venture, Borgo Hypotek.
Just like the major banks, Borgo can attract deposits and therefore has multiple sources of funding. The total mortgage volume by the mid-year was 33.7 billion SEK, which corresponds to a market share of just under 1%. Last year, Borgo grew by 100%, but the net interest income ended up at -77 million SEK.
A Collaboration Among Various Actors
Behind Borgo, which is only a few years old, 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, business manager at ICA Banken.
However, Borgo operates in the background. The storefront to customers is through each respective brand that conveys the mortgages to their customers.
“The intermediaries set the price for the customer, but Borgo makes the credit decisions and is the lender,” explains Borgo’s marketing manager, Adam Lewenhaupt.
ICA Swaps Grocery Bags for Lower Interest Rates
For ICA Bank’s customers, for example, this means that the more you shop at ICA, the better interest rate you get.
A customer who spends over 6000 SEK per month on groceries at ICA can have their interest rate reduced by up to an additional 50 basis points. On a loan of 15 million SEK with 50% leverage, this means approximately 2800 SEK lower cost per month before tax deductions. “We have taken a holistic approach to everyday economics where the biggest cost items for ordinary customers such as housing, groceries, insurance, pharmacy, and health provide better mortgage rates. The comprehensive value proposition ensures that customers have more money left in their wallets,” says Erik Salzberg at ICA Banken.
With high inflation and rising interest rates looming, the mortgage market has been even slower than usual. But there has been some sort of turnaround with increased activity this year, resulting in greater demand for mortgages. The question is, what will mobility look like?
Ensuring “Fair Conditions” for All
“We believe that everyone should have the opportunity for the same fair conditions with clear and transparent pricing, which is why our mortgage rates are based on the loan-to-value ratio. On the website, you can see directly what rate you will get, it is negotiated and clear,” says Katarina Erichs Emilson, communications manager at Ikano Bank.
Ikano Bank has a similar setup to ICA Bank where members, in this case IKEA members, get better mortgages.
Just like at ICA Bank, Ikano Bank’s customers can borrow up to 85% of the property’s value. However, one should be cautious of fees that make the effective interest rate slightly higher than at first glance.
A comparison between these two actors shows that Ikano Bank’s customers have received a slightly lower rate both in 2022 and 2023, but where ICA Bank’s customers have been able to borrow more affordably this year.
Landshypotek Offers Affordable Mortgages
Even cheaper is borrowing through Landshypotek, owned by 34,000 farmers and foresters. The bank truly stands out even in comparison to major banks and other smaller but relatively larger newcomers like Skandiabanken and LF Bank.
“We have started to establish ourselves as a significant newcomer, where open and negotiation-free interest rates have been a central part of what many like. We and some other challenger banks are paving a new path. Recently, we have lent nearly 27 billion SEK in mortgages to customers across the country,” says Catharina Åbjörnsson Lindgren, business manager for mortgages 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 looked at.
“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 the Riksbank rate cuts on several occasions. Since the turn of the year, we have also reduced the list price on the 3-month rate more than both the Riksbank and most of the competitors,” says Catharina Åbjörnsson.
Limited Loan-to-Value Ratio
But there is a catch. If you need to borrow up to the mortgage ceiling of 85%, you can’t do it with Landshypotek.
“We chose to limit the loan-to-value ratio to 75% when we started with mortgages and were new to the mortgage market. We constantly evaluate how we can develop our business to best meet customer needs. 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 their way to us,” says Catharina Åbjörnsson.
Mortgage Funds Trying to Attract Customers
Some others vying for a piece of the mortgage pie are Stabelo, with high-profile owners such as 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. Money invested by pension funds like Folksam, SPP, and Alecta is placed in a so-called mortgage fund from which money is lent to mortgage borrowers. However, without secured bonds and without funding 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 can only lend up to 60% of the property’s value so far. With a higher loan-to-value ratio, the risk in the mortgage portfolio increases, and therefore the return requirement, which means that Hypoteket’s rates are slightly higher than Stabelo’s, according to Afv’s analysis. However, it is primarily the major banks that Hypoteket aims to challenge.
“The rapid interest rate hikes during 2023-2024 have benefited actors with significant deposits who have seen the margin on their mortgage business more than halved but compensated by delayed or absent interest rate hikes on their customers’ savings and transaction accounts. But we do not believe that the banks will accept lower revenues on their mortgage business over time,” says Hypoteket’s CEO Carl Johan Nordquist.
Online Brokers Also Engage in Price Wars
Online brokers Avanza and Nordnet are also participating in the price war. However, at these brokers, the interest rate depends on the amount of savings you have.
Nordnet offers the absolute lowest rate to borrowers with 15 million SEK in total savings, including any occupational pension.
If you manage to accumulate this amount, the rates are truly advantageous, but not always the cheapest.
For customers 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 customers and the interest rate is directly linked to the repo rate. Then you get a discount depending on how much savings you have with us,” says Avanza’s communications manager Sofia Svavar. She points out that Avanza only lends out a small part of its deposits and has only a limited pot to lend out for housing.
Sofia Svavar, Avanza’s communications manager, emphasizes the importance of finding the right mortgage lender that caters to your financial needs and goals. With Nordnet and Avanza directing customers to Stabelo and Landshypotek, respectively, it showcases the importance of diversifying options and finding the best fit for your specific financial situation.
Stabelo, a mortgage lender recommended by Nordnet for customers with capital under 5 million, offers competitive rates and terms tailored to individual needs. By partnering with Nordnet, Stabelo ensures that customers have access to a wide range of mortgage options that suit their financial goals.
Similarly, Avanza’s partnership with Landshypotek provides customers with another avenue to explore when seeking a mortgage. With Landshypotek’s focus on sustainable and ethical lending practices, customers can feel confident in their choice of mortgage lender.
The collaboration between these popular investment platforms and mortgage lenders highlights the importance of offering customers a variety of options to meet their financial needs. By leveraging partnerships and relationships in the financial industry, Nordnet and Avanza are able to provide their customers with valuable resources and opportunities to secure the best mortgage rates available.
In a competitive market where interest rates and terms can vary widely, it is crucial for customers to explore all their options and find the best mortgage lender for their specific situation. By working with trusted partners like Stabelo and Landshypotek, Nordnet and Avanza are able to offer their customers peace of mind and confidence in their mortgage decisions.
As the financial landscape continues to evolve, it is essential for customers to stay informed and educated about their options when it comes to mortgages and other financial products. By partnering with reputable lenders and providing valuable resources, Nordnet and Avanza are empowering their customers to make sound financial decisions for the future.
In conclusion, Nordnet and Avanza’s partnerships with Stabelo and Landshypotek demonstrate their commitment to providing customers with the best possible options for securing a mortgage. By working with trusted lenders and offering competitive rates, they are helping customers navigate the complex world of mortgages with confidence and ease.