Most people probably know that it is almost always possible to bargain on the mortgage and negotiate a lower interest rate than the bank has set out from the beginning. It seems that it is extremely good to bargain for those who buy housing in expensive areas such as Lidingö and Östermalm. What this is due to and a little general about how it works to bargain on mortgages, I will address in this post.
Thanks to the Bank’s interest rate map, where people can themselves report what they have managed to get interest on their mortgage (after negotiation and bargaining), a lot of observations can be made. Statistics of this kind are interesting and provide an opportunity to look at relationships that you would not otherwise have been able to investigate in a good way. The banks themselves are not exactly known for sharing statistics, especially not for how well they can bargain with them.
By looking at what people have reported regarding their interest rates
One can see that it is actually usually possible to get the most discount on the mortgage rate in areas where housing is expensive. People living in eg Lidingö and Östermalm have reported some of the lowest interest rates. In these areas, housing costs expensive money, but it is also the case that these homes are often among the most mortgaged. People who buy housing here, on average, clearly take larger mortgages.
The fact that it is possible to negotiate better mortgage rates is something that most people know. One should always negotiate and see if it is possible to bargain down the price. The interest rates that the banks list are often a good part of what they actually intend to lend to. For example, the banks’ 3-month interest rates are currently around 2.78 – 2.96%, but the average of what people actually received for interest rates in May is at 2.67% when the negotiations are concluded.
How is it that they can get lower interest rates?
Perhaps an interesting question is why is it this way? There are certainly many answers to that question, but some of the reasons are probably quite logical. Firstly, it is simply that people who buy housing in such areas often have a good economy, saved assets and a fairly high income. They then have a good starting point in general when negotiating. The risk becomes small for the bank when the borrower has a high credit rating.
It is also conceivable that you get a certain amount discount. It may sound simple but just like when you buy other things it may be relevant to lower the price when buying larger quantities and if you take a large mortgage you can thus get a little bigger discount on the interest rate. The banks make more money on larger loans and can therefore pay for this.
A third reason discussed is if people living in these “fine” areas may be better at negotiating and bargaining and that this is the reason for lower interest rates. There is nothing to say that they have to be better but they may more often have higher education, higher social status and a job with more responsibility etc. Such things can make you better at negotiating but also that it will be easier to negotiate because the starting position is a little better.
In summary, you may first and foremost say that you should always bargain for your mortgage. In principle, there is always little to take on and the banks’ starting interest rates should not be accepted straight away. Depending on what you have for the financial situation – income, assets etc – you obviously have different starting points, but you should always try.
By the way, you can probably say that the reason why the “expensive” areas show the biggest discounts is probably simply that those who buy housing there have a good starting point to bargain. They usually have good income, other assets etc and overall creditworthiness. Then they often take large loans – which the banks like.