Speculations about a double interest rate cut in August gained momentum in last week's market turmoil. And now, the probability of a total of four cuts of 0.25 percentage points each this year has increased to 99 percent in market pricing.
A week ago, the probability of this scenario was 86 percent in market pricing. And just a month ago, it pointed to three cuts this year, with a probability of 95 percent.
The Swedish Central Bank has, in its own so-called interest rate path, outlined a scenario in which the interest rate can be cut two or three times this year.
Currently, the interest rate stands at 3.75 percent after the Swedish Central Bank made its first cut in almost eight years from 4.00 percent in May.
Interest rate cuts are expected to continue next year, down to 1.75-2.00 percent, according to market pricing.
The Swedish Central Bank's interest rate – which has been raised to unusually high levels during the inflation and interest rate shock of 2022–2023 – affects, among other things, variable mortgage rates and other interest rates in the Swedish economy.
If mortgage rates follow the interest rate down by 1 percentage point, the interest cost for a mortgage of three million kronor would decrease by 30,000 kronor per year or 2,500 kronor per month, if one disregards the effects of interest deductions.
