Dan Lucas: Why can inflation affect mortgage rates

1. Why falls the rate of inflation?

– the consumer price index (CPI) measures changes in the prices of a wide array of goods and services, and it fell by one per cent in January, compared with december.

– the CPI tend to fall in January as a result of sales, not least on the clothing where the price decrease, compared with december, was 13 per cent. This, in turn, struck through with the whole 0.6 percentage points on the CPI.

2. What does the lower rate of inflation for mortgage rates?

– In the short term – hardly anything. The CPIF, which is the measure of inflation used by the Riksbank, fell from 2.2 per cent in december to 2.0 per cent in January. It has received importance for the Swedish krona, which weakened during the Tuesday morning. But that said, a lot can be explained by normal seasonal variations.

– But in the long term, if we continue to get inflationsstatistik which is below expectations, it may very well lead to a reduction in mortgage rates. But we are not there yet.

3. What does it mean for the Riksbank and their forecast of future interest rate increases?

– Here, the figure of major importance. The riksbank's current forecast indicates that we get a rate hike in the second half of this year ”provided that the economic and inflation outlook is” as the board wrote in last week when they left its repo rate unchanged.

– It is the last link in the sentence that is interesting. The riksbank had spått to the CPIF in January would end up in a whole 2.4 per cent. It's a fairly large prognosmiss and thereby putting pressure on the Riksbank and its governing executive board head Stefan Ingves in the tip.

" we Go against an even weaker economic conditions or continued pressure on the inflation increase in interest rates to be pushed even further in the future. And it will have an effect on mortgage rates.