Home loan interest rate | Read about the reference rate and margin

Your home loan interest rate is composed of a reference rate and a margin

A variable interest rate on a home loan consists of a customer-specific margin and a reference rate. The margin will remain the same throughout the loan period, whereas the reference rate will fluctuate according to market interest rates.

The reference rate on a home loan may be the 3-month, 6-month or 12-month Euribor rate or the Nordea Prime rate. Alternatively, you can choose a fixed interest rate, which means that your interest rate will remain unchanged for the chosen period.

What factors affect the home loan margin?

The margin we charge for your home loan depends on your circumstances, including the collateral you can provide and your repayment ability. From our point of view, the loan margin covers our expenses and the risk we take by granting the loan.

You will find out the precise margin when you apply for a preliminary loan offer from us. We agree on the margin separately with each customer and for each loan, and record it in the loan agreement.

Variable or fixed interest rate?

When choosing your home loan interest rate, think about whether you need stability and predictability with your loan payments or want to tap into the quick changes in market interest rates.

Variable rates change based on the movements in the interest rate markets, meaning that they rise when interest rates rise and fall when interest rates fall. With a variable rate, you get to benefit from favourable changes in interest rates, as the interest on your loan will decrease when the value of the reference rate falls.

The risk you need to accept is that interest rates may rise, and if that happens, your home loan interest rate will rise, too, when the interest period ends. In other words, the reference rate of your home loan doesn’t change daily according to market fluctuations but only on the interest rate revision dates.

Euribor rates are available for different tenors. The 3- and 6-month Euribor rates react faster to changes in the general interest rate environment, whereas the 12-month Euribor offers peace of mind for one year at a time.

Nordea Prime is a reference rate issued by us that is adjusted in line with the market rates, albeit less frequently than the Euribor rates.

Borrowers with a variable-rate loan benefit from falling interest rates, while borrowers with a long-term fixed rate remain mostly unaffected when interest rates rise.

Should you change the reference rate of your existing loan?

In home loans the loan period is typically long, 23 years on average. The moment for changing the reference rate is short compared to the entire loan period. So when you’re assessing the interest expenses of your loan, it’s more essential to consider where interest rates will be in a few years rather than in a few weeks or months.

You should keep in mind that the choice between a fixed rate and a variable rate will have a bigger impact on your loan costs than the choice between the different Euribor rates. Changing the reference rate may also affect the loan margin.

Do you need more information about reference rates?

We will help you select the right reference rate when you negotiate on a home loan with us.

Secure your home loan reference rate with interest rate hedging

When you negotiate with us on a home loan, we will perform a stress test on your loan costs. We calculate how your total loan costs would change if the loan interest rose to 6%. This is one way for us and for you to ensure that you will have enough money left to service your loan after your other expenses.

We also recommend that you save while you repay your loan to ensure that you can cover rising interest rates or other unexpected expenses without losing control over your finances.

You can hedge your home loan with an interest rate collar, an interest rate cap or a fixed interest rate. With an interest rate hedge included in your loan, you will always know in advance how much interest you need to pay.

Learn more about interest rate hedging in home loans

Mies keltaisessa sadetakissa etsimässä kotia

With our interest rate hedging products you will always know in advance how much interest you need to pay.

Annual percentage rate of charge takes into account the interest rate and additional charges

Besides the interest rate, your home loan includes other loan servicing costs, which are taken into account in calculating the home loan’s annual percentage rate of charge. The annual percentage rate of charge for a home loan accounts for all its costs, including the opening fee and account management fee.

Therefore, when comparing the prices of loans, you should use the annual percentage rate of charge.

Frequently asked questions about home loan interest rates

When will the interest rate of my home loan change?

The reference rate of your home loan is revised at the end of each interest rate period on what is called an interest rate revision date.

The interest rate revision date depends on the reference rate of your home loan. The reference rate of a home loan tied to the 12-month Euribor is revised every 12 months, whereas the reference rate of a home loan tied to the 6-month Euribor is revised every 6 months.

In other words, your reference rate doesn’t change daily according to market fluctuations but only on the interest rate revision dates.

The new reference rate applied to your loan will be the rate established two quotation days before the interest rate period of your loan tied to an Euribor rate changes. Euribor rates are quoted on all other days except Saturdays, Sundays, 1 January, Good Friday, Easter Monday, 1 May, 25 December and 26 December.

As an example, if your loan’s interest rate period changes on a Friday, your new reference rate will be determined by the rate quoted on the Wednesday preceding it.

Where can I see the revision date of my home interest rate?

If your reference rate is a Euribor rate, you will see the start and end date of your interest rate period under your loan details in Nordea Mobile and Netbank.

Unlike the Euribor rates, the Nordea Prime rate does not have an interest rate revision date. We will announce any revisions to the Nordea Prime rate at least 14 days before the new rate enters into force.

How much can interest rate fluctuations affect my loan payment?

As interest rates rise, many things, including your remaining loan amount, loan period and the repayment method you have chosen, will affect your monthly payment and interest costs.

The table below gives you an indication of how different interest rates could affect your loan payment. In the examples, the loan payments are calculated based on a 25-year annuity loan with an interest rate margin of 0.8%. The amount includes both the monthly instalment and the interest. The calculation is indicative.

Loan payment at various reference rates	2% (total interest rate 2.8%)	3% (total interest rate 3.8%)	4% (total interest rate 4.8%)	5% (total interest rate 5.8%)
EUR 100,000	EUR 469	EUR 523	EUR 573	EUR 633
EUR 150,000	EUR 702	EUR 783	EUR 860	EUR 949
EUR 200,000	EUR 935	EUR 1,043	EUR 1,146	EUR 1,265
EUR 300,000	EUR 1,401	EUR 1,563	EUR 1,719	EUR 1,897
EUR 400,000	EUR 1,867	EUR 2,083	EUR 2,292	EUR 2,529

You can also get an idea of the amount of your monthly payment using our home loan calculator.

Open home loan calculator

When should I hedge my home loan against rising interest rates?

It’s good to consider how much higher interest costs you can afford so that your home loan costs will also leave you room to save some money, pay your normal day-to-day expenses and spend on things you enjoy.

When you choose a fixed rate for your home loan or hedge your home loan against rising interest rates, you will always know the maximum amount of interest you will have to pay. With an interest rate hedge, you can protect your whole variable-rate loan or half of it, for example.

Our home loan experts are happy to help you find the best solution for you.

Read about how you can protect yourself against higher rates.

What should I do if my monthly home loan payment feels too high?

If you’re struggling with your loan payments, it’s important to know you’re not alone – we can help. Contact us as soon as possible and let’s work out the best solution for you together. You might be able to extend your loan period, take a payment holiday or take advantage of the free FlexiPayment feature included in your home loan. FlexiPayment allows you to reduce your monthly payment in Nordea Mobile or Netbank when you need to. Read how you can use FlexiPayment or apply for a change to your loan repayment.

Can I change the reference rate of my current home loan?

You can change the reference rate of your current home loan to any other reference rate we offer during the loan period. For example, you can switch from the 12-month Euribor to the Nordea Prime rate or the 3-month Euribor.

We will charge a fee for changing the reference rate. The fee is lower if you switch on the interest rate adjustment date. You can see the interest rate adjustment date under your loan details in Nordea Mobile and Netbank. If you wish to change the reference rate, please inform us of this at most 30 banking days and at least 5 banking days before your current interest rate period ends. Unlike the other reference rates we offer, the Nordea Prime rate does not have an interest rate adjustment date.

If the reference rate of your home loan is the 12-month Euribor and you wish to change it to Nordea Prime, you can do this by submitting the appropriate form in Nordea Mobile or Netbank.
If you wish to swap the 12-month Euribor or any other reference rate with another reference rate either on the interest rate adjustment date or in the middle of the interest rate period, please contact our Customer Service.

Changing the reference rate may also affect the margin of your loan.

We will send the appendix to the loan agreement for you to sign digitally. The borrowers and any third-party pledgers must sign the appendix before the end of the interest determination period.

If you decide to purchase an interest rate hedging product, you can change the reference rate free of charge, regardless of whether you do this on the interest rate adjustment date or not.

See our tariff

Our experts Chief Analyst Jan von Gerich and Jussi Pajala, CEO of Nordea Mortgage Bank, know Euribor rates in and out and tell you what you need to know about them.

Read what our experts say about Euribor rates

Nordea Prime is Nordea’s own reference rate. It tracks market rates but is more stable than them. It is used as a reference rate for home loans, as well as other types of loans.