Protection against interest rate changes

Flexibility for your loan

No separate fee

Why buy an interest rate collar?

By adding an interest rate collar to your loan, you can protect your loan against changes in its reference rate for years to come. An interest rate collar won’t prevent you from making changes to your repayment schedule, which means that you can apply for a payment holiday and use FlexiPayment, for example.

  • The monthly loan payment is typically the largest single expense in a household. By hedging against the interest rate risk, you ensure stable finances even in an unstable environment.
  • You can flexibly adjust your loan’s repayment schedule.
  • If you opt for an interest rate collar, you won’t have to pay a separate hedging fee like with other hedging products.

What does an interest rate collar do?

By adding an interest rate collar to your loan, you ensure that your monthly loan payment won’t fall below or exceed the agreed limits while the collar is in force. The interest rate collar makes sure that your monthly payment won’t exceed the defined maximum level even if the reference rate rises above the cap level. The floor level of the interest rate collar determines the minimum level of the reference rate. The monthly payment comprises the loan instalment, the reference rate and the loan margin.

Interest rate collar - cap and floor - large

Features
Interest rate collar for new and existing loans
Levels and price
Example

Features of the interest rate collar

  • The hedging period is 3, 4, 5, 7 or 10 years.
  • In loans with an interest rate collar, the reference rate is the 3-month, 6-month or 12-month Euribor. This means you can make changes to the repayment schedule and other details of your loan on the same basis as with other Euribor-linked loans.
  • The interest rate collar is also available for secured consumer loans.

The minimum loan amount is 15,000 euros and the loan period is at least as long as the interest rate collar period. You can’t add an interest rate collar to an existing loan until the loan has been drawn down in full.

Interest rate collar is also available for existing loans

  • You can agree on an interest rate collar for your new home loan at your loan meeting.
  • If you want to add an interest rate collar to your existing loan, please contact us.
  • You can protect the whole loan or half of it, for example.

Interest rate collar: levels and price

  • You don’t pay any separate fee for an interest rate collar.
  • The actual levels of an interest rate collar are determined when you draw down the loan, which means that they can deviate from what you have previously discussed with us.
  • Contact us to get an offer for an interest rate hedge.

Example of an interest rate collar and the annual percentage rate (APR)

Example: You take out a home loan of 150,000 euros and the loan period is set at 24 years. The agreed reference rate is the 12-month Euribor and the margin is 0.53% (April 2024). You choose to add an interest rate collar to your loan for 5 years, which will set the minimum level of the reference rate at 2.99% and the maximum level at 3.89% (levels in April 2024). The APR is 4.4%, including an opening fee of 600 euros and a monthly fee of 2.50 euros for the automatic debiting of loan payments. The number of payments is 288. The total amount of the loan and loan costs is 240,585 euros. The monthly payment (annuity) is 830 euros at drawdown.

The loan amount and interest are a representative example for home loans offered by Nordea. The example, however, is only indicative and has been calculated using certain assumptions. The example does not necessarily correspond to the actual APR charged on the granted loan.

When buying a home, you also need to pay the costs related to the registration of ownership and pledging of your home. You also need to see to it that your home insurance is up to date. In case of a property, you will need fire insurance at the least. In some cases, we need the help of a real estate agent to determine the value of your home. We will charge a fee for this service.

Wondering about the effect of rising interest rates?

Protect your loan and finances against rising interest rates and costs by saving or with interest rate hedging.

Read about how you can protect your finances against higher rates

Should I save and invest or pay off my housing loan?

Finns have traditionally repaid their home loans quickly but it may not the best option for most. Wondering why?

Read more about saving while repaying a loan

What would higher interest rates mean for your monthly loan payment?

Use our home loan calculator to see how a change in interest rate would affect your monthly payments.

Try our home loan calculator