Lending rate slowly rising after all-time low in april 2020

From January to April 2020, Finland's credit rate fell from 4.6198% to the lowest level of 3.2078%. It didn't take long, however. In the following month, the rate returned to 4.2278%, which is a percentage increase of almost 32%!

After reaching a record low level, the interest rate on the Bank of Finland's loans slowly starts to rise again. Throughout the rest of the year, Finland's average interest rate - which hovered around 4.18% - was one of the highest in Europe. Only Latvia, Russia and Ukraine have higher interest rates, at the levels of 4.36, 6.24 and 11.16%, respectively.

The 3 main effects of higher interest rates on loans:

Loans are less available

The greatest effect of increasing loan rates is that loans become less accessible. Many people may feel discouraged from taking out new loans and those who have already taken out will face higher interest rates.

People are more likely to save than spend money

This could have a negative effect on the economy. As it lowers a country's disposable income level, it means people are less likely to spend money in businesses such as stores, restaurants, and entertainment stores.

National confidence can fall

In times of higher interest rates, both individuals and corporations are much less inclined to make risky investments. This can adversely affect early-stage businesses and other high-risk opportunities that depend on investor funding.

It also means that firms are less likely to form. With the cost of bank loans rising, many people may not want to take the financial risks of starting and financing a new business venture. This can result in fewer workplaces.