Of Banks And Politicians

To show you that I'm not politically motivated, I will now pick on the current Norwegian government led by Labor (Arbeiderpartiet). Oh, looking at the news it's impossible to miss the fact that the general election is approaching!

At least since 2011 the Prime Minister, Jens Stoltenberg, and the Finance Minister Sigbjørn Johnsen, have not been hiding (here and here) the fact they are very concerned about a possibility for a housing bubble. And even now they don't deny it, even though they might try to downplay it somewhat (you don't win an election by telling people living in a bubble that they are living in a bubble?). Anyway, the government has been working hard to make mortgages less profitable for banks, and legislation to achieve this is already on its way. Basically they are telling the banks that "if it's a bubble, you need to save yourselves, the government can't foot the bill". Well, how does an investor like a bank respond to increased risk? They ask more compensation for bearing the risk, in this case through higher interest rates on the mortgages.

How does the government respond in an election year when many banks tell their clients that they will take mortgage rates up 0,3 %-points initially (and that more may follow) and that it is due to demands from the government? The government gets furious! And the Finance Minister says banks are doing so good that there's no need to increase the mortage rates.

Do not expect any responsible behavior from the politicians before autumn 2013! And like in this case, if they have behaved responsibly earlier, expect them to deny it at least three times.

By the way, this news spells a lot of "bad blood" between the banks that compete for mortgage customers in Norway. Skandiabanken, which is a subsidiary bank of a Swedish insurance company, is reporting that during the last two weeks they have received a huge flow of mortgage clients from the banks (for example the giants DnB and Nordea) who warned about increases in their mortgage rates by 0,3-0,35 %-points. Skandiabanken tells that they are not thinking about increasing the rates, hinting that the doors are open for new customers.

This might get dirty?