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An interest rate hedge is like an insurance for a loan
According to Nordea’s latest housing survey, only a small number of Finns have hedged their home loan against rising interest rates, even though market movements in recent years have clearly increased the need to plan personal finances more carefully.
Finnish home loans are usually tied to the an Euribor rate. As a result, fluctuations in interest rates can push up monthly home loan payments – something that concerns many borrowers. According to Nordea’s April 2026 forecast, the ECB is expected to raise rates four times during this year. The policy rate is expected to rise to 3% by October.
One way to hedge a home loan is to use the interest rate hedging options offered by banks, such as an interest rate cap, an interest rate collar or a fixed rate. According to the survey commissioned by us, less than 10% of Finnish mortgage holders use interest rate hedging. One third have not considered it at all, and the remaining 27% say they don’t feel sufficiently acquainted with it.
“In Central European countries home loans often have a fixed rate with less flexibility than variable rates. Interest rate hedging can be used in both alternatives. We aim to mitigate risks faced by households in several ways,” says Nordea’s economist Juho Kostiainen.
One popular interest rate hedging option is an interest rate cap that sets a cap for the loan interest rate. This means that the reference rate of a home loan won’t exceed the agreed level during the validity of the cap, no matter what happens on the market. Therefore it is possible to realise your home dreams even in uncertain times and to plan ahead financially.
Many still remember the time when interest rates were low and interest rate hedging was seen as unnecessary caution. Since then, attitudes have changed.
“An interest rate hedge is like a home insurance. No one thinks their house will burn down, but they have an insurance policy to cover that. If interest rates should rise, an interest rate hedge is a small cost to avoid much larger losses,” Kostiainen says.
Personal finances under close scrutiny
Different options for safeguarding personal finances are now attracting strong interest from many banks’ customers, as uncertainty continues to weigh on the outlook. In discussions with our customers, interest rate hedging is no longer the bogeyman it once was.
“Customers have questions about interest rates and discussions around interest rate hedging have become more open. It can genuinely help protect personal finances,” says Nordea’s finance expert Medine Linnainsaari.
Linnainsaari points out that everyone’s financial situation is different, and there is no one-size-fits-all solution. This is why it’s good to have an open dialogue, review your personal finances and consider different options.
Many people looking to move home are now carefully weighing their options. Even if they would get a lower price for their current home than they had hoped, they can buy a new – and potentially larger – home also at a lower price.
Sometimes it makes sense to sell at a lower price
Home prices are currently low, which has slowed down sellers’ decision-making. Even so, you should not postpone changing homes. Even if they would get a lower price for their current home than they had hoped, they can buy a new – and potentially larger – home also at a lower price.
If you want to change homes, you can fill in the home loan application and start discussions with us even if there is not yet full certainty about the property you are planning to buy or the sale of your current home. Submitting an application will not commit you to anything.
“Timing has an impact mainly on first-time home buyers. There is solid research evidence to support this. In general, the right time to sell and move is simply when you need a new home,” says Kostiainen.
Hedge, save and invest
Both Kostiainen and Linnainsaari encourage people to look beyond their home loan and to consider other aspects of their personal finances as well. Investing and saving, for example, are important parts of the overall picture.
“Finns have traditionally wanted to repay their loans quickly. For some, that can be a good option, but it is also important to leave room for a small financial buffer,” Kostiainen says.
Investing can help you build wealth, while buffer savings provide flexibility when circumstances change.
This article was published originally in Ilta-Sanomat and Helsingin Sanomat (April 2026).
