New mortgage loan protects against interest rate risk

The rising interest rates have made more and more borrowers consider protecting their mortgage loans against changes in interest rates. Nordea is the first bank in Finland to launch a callable Longer Term Fixed Rate Mortgage (LT FRM) with a fixed-rate period of up to 15 years. The flexibility of this new kind of mortgage loan is based on the possibility of repaying the loan at any time without any extra costs - unlike with loans of fixed interest rate periods in general.

In Finland over 90 per cent of mortgage loans are tied to variable interest rate. In the other Nordic countries fixed-rate loans are considerably more popular. In Sweden and Denmark the share of loans with fixed interest rates is more than 60 per cent. In Denmark Nordea has already for years offered customers callable LT FRMs. Nordea will launch this loan product as a novelty to the Finnish market as well.

- With ordinary fixed-rate mortgage loans, quite high costs may have been accrued to customers on premature repayment of a loan. Now in certain cases customers may even be credited for premature repayment, says Pekka Luukkanen, Manager, Housing and Products.

Callable LT FRMs can be adjusted according to the customer's life situation. For instance, the customer can easily change the loan to have a variable interest rate without any costs arising from the premature repayment. A 15-year fixed interest rate will at first be available for a callable LT FRM with 30 years' maturity.

- Our customers' interest towards products protecting against interest rate risk has notably increased over the past year. Thus we have already earlier this year supplemented our selection of products with ordinary fixed-rate periods of up to 10 and 15 years and with an interest rate ceiling that the customer can use for protecting a loan tied to the Euribor reference rate against a rise in the interest rates, he continues.

For further information: Pekka Luukkanen, Segment Household, +358 9 165 88147, +358 50 352 5265 Atte Palomäki, Group Identity and Communications, +358 9 16542325, +358 40 5476 390