Housing loan interest rates in Finland - which are tied to 12-month Euribor rates that have been sub-zero since the beginning of 2017 - will likely rise next spring, according to Olli Kärkkäinen, a private banking economist at Nordea Bank's Finnish branch.
"The European Central Bank is expected to raise interest rates by the end of next year but this [change] will be reflected proactively in mortgage interest rates [in Finland]," Kärkkäinen said.
According to the economist, a one-percent rise in the interest rate on a home loan of 120,000 euros would lead to monthly increases in mortgage payments of around 50 euros, while a two-percent interest hike would cost homeowners more than 100 euros extra per month.
Nordea said a Euribor interest hike would affect Finnish borrowers more quickly than in many other European countries. In Finland, more than 90 percent of mortgages are tied to Euribor's adjustable interest rates.
Time for household budget checks
Kärkkäinen said that now is a good time for mortgage holders to check their budgets in order to deal with the likelihood of a rise in interest rates.
According to the bank, the housing market in Finland has been weaker than anticipated. Kärkkäinen said that in terms of housing sales, the past year has been an unexpected disappointment, particularly in light of generally good economic indicators like improved employment and purchasing power and generally positive consumer confidence levels.
He said the real estate market has not seen significant improvement since the summer, when the sector reported disappointing sales.