Interest rate sensitivity — can your finances handle the next rate hike?

Between 2022 and 2023, the Riksbank (Sweden’s central bank) raised the policy rate from 0% to 4%. Mortgage rates followed. For a mortgage of SEK 3 million with a variable rate, the interest cost increased by around SEK 7,500 per month, before the tax deduction (ranteavdrag).

That was not a hypothetical scenario. It happened. And most people had not calculated for it.

The rule of thumb to keep in mind

Each percentage point of interest costs roughly SEK 830 per million per month, before the tax deduction. With the deduction (30%) it becomes SEK 580 per million.

Interest rate	Interest cost/month	After deduction	Difference vs 3%
3%	SEK 7,500	SEK 5,250	—
5%	SEK 12,500	SEK 8,750	+SEK 3,500
7%	SEK 17,500	SEK 12,250	+SEK 7,000

From 3% to 7% is SEK 7,000 more per month after the deduction. That is the equivalent of a part-time job in extra housing costs. During 2022–2023 the interest cost increased by roughly the same amount — around SEK 7,500 per month before the deduction.

(The tax deduction (ranteavdrag) is 30% on up to SEK 100,000 per year in interest costs. Above that, 21% applies. The table simplifies to 30%.)

Approximately 75% of Swedish mortgage holders have variable rates, which means every rate change takes effect within three months. A fixed rate is insurance. Like all insurance it costs money — a premium today to avoid unpleasant surprises tomorrow. There is no objectively right choice. It depends on your buffer and how well you sleep at night.

Run your own stress test

The bank tests you at a 6–7% stress interest rate (kalkylranta) in the affordability assessment (KALP — kvar att leva pa). But their test is based on standardised estimates, not your actual budget.

Take your current budget: actual expenses, not estimates. Add the interest cost if rates rise by 2 percentage points. Is there money left, with a margin for the unexpected? And then: can you handle plus 3 percentage points? If not, you should consider whether the property is in the right price range, or whether part of the loan should be fixed.

There are also three ways to reduce sensitivity directly. A cheaper property reduces the loan and the sensitivity right away. Every million less in borrowing saves SEK 580 per percentage point. A larger down payment (kontantinsats) has the same effect. And fixing part of the loan — a common setup is 50% variable and 50% fixed — provides a buffer without giving up all flexibility.

If you want to negotiate your mortgage rate down, that is one of the fastest ways to reduce your total sensitivity — one phone call can save tens of thousands of kronor.

Run an interest rate sensitivity analysis and see exactly how your monthly cost changes at different rate levels. In BoKalk you can quickly see whether your finances can handle a rise — and how much buffer you actually have.

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Christoffer, founder BoKalk