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Banks increase margins even on business loans and it get expensive for businesses to borrow

Thursday, 22 March 2012
Not only Swedish households that are facing the quarantine from borrowing, companies are also paying more for their loans. Compared to the years before the financial crisis, the difference between the interest rate on new corporate loans and repo rate has doubled according, latest media reports show.

We have talked a lot about banks increasing their margins on mortgages. Now it turns out that it also applies to banks' corporate loans.

The difference between the repo rate and banks' average interest rate has increased by one percentage point compared to how it looked in late 2008, according to figures from the Swedish central banks and Statistic Sweden.

Those that feel the pain most as would be imagined are mainly the small and medium-sized businesses that are affected by interest rate increases because larger companies often use bond markets for funding.

It is not pretty clear if the margins on corporate loans will increase in the future. The bank SEB highlights that the margins on business loans are given to any other business customer in the bank, and that this is driven by how long the relationship the company has with the bank and the effects of local competition.
By Team

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