High inflation, high economic activity, high employment levels, and a weak krone were behind Norges Bank, the central bank of Norway, raising the key policy rate. 

Analysts predict the bank will continue raising the key policy rate to between 3.5 and 3.75 percent by this autumn. 

While the numbers may not seem massive, and the topic of interest rates may seem dry, these decisions can directly impact your finances. 

The most obvious and immediate impact of the rate increase means more expensive loan and remortgage repayments if you aren’t on a fixed-rate deal. 

A mortgage of around two million kroner can now be considered 2,900 kroner a month more expensive than a year prior. This will be noticeable in the payments you make in the coming months, as it usually takes the banks in Norway six to eight weeks to introduce higher rates. 

Around 95 percent of Norwegians have floating interest rates, meaning many will feel the squeeze of interest rates increasing in the coming months. The next hike from the central bank is likely to be announced in May. 

Following the hikes, many should expect a mortgage interest rate of around 4.8 percent by early next year. Meanwhile, Carsten Henrik Pihl from the Homeowners Association told the Norwegian newswire NTB that a mortgage rate of 4.5 percent could be considered a good deal. 

Mortgage rates are expected to remain at the peak of almost five percent for around the next two years, Nordea’s chief economist Kjetil Olsen told business news publication E24. 

Higher interest rates eat into disposable income. This means people will spend less than they would otherwise generally do and reduce the demand for homes, cooling the property market. 

“Interest expenses increase and eat away at disposable income so that it reduces purchasing power. This, in turn, reduces both housing demand and general consumption,” Nejra Macic from the Forecast Centre told E24. 

Lower demand for housing may result in property prices dipping or slowing down, which is good news for buyers who have trouble keeping up with soaring prices, but news for those who may have bought recently or plan on a quick sale. 

On a more macro-level, lower consumption may slow inflation, which Norges Bank has always intended to achieve with interest rate raises. 

Those who are young or single are most likely to feel the squeeze of the latest interest rate increases as they tend to have a higher ratio of debt to income, Macic explained to E24. The same could be true for those living in Oslo, as traditionally, the capital has the highest debt-to-income ratio in Norway. 

Additionally, the interest rates will also impact how much value you get for your kroner when you go abroad. Several factors are currently contributing to the krone being at its weakest level for several years. 

Among the factors is interest rates in Norway being lower than in the Eurozone and the US. This makes the krone less attractive than the euro and the dollar for investors. 

Even with the forecasted rises, interest rates are unlikely to be higher in Norway than in other countries. This has led to some analysts predicting that the krone would likely remain weak as interest rates would have to be hiked higher to boost the krone. 

“I do not believe that Norges Bank, through the interest rate differential, will be able to secure a stronger krone exchange rate over time,” Kjetil Martinsen, the chief economist for Swedbank, told Finansavisen. 

A weaker krone means you get less value for your money abroad, making foreign trips and holidays more expensive. A weak krone also makes imports more expensive, meaning that goods that aren’t produced in Norway become more expensive.