Korko (Interest Rate)

Detailed explanation

Finnish mortgages typically consist of two components: the Euribor reference rate and the bank's own margin. The most common reference rates are the 3-month and 12-month Euribor. When you take out a mortgage, the bank adds its margin (typically 0.3%–1.0%) on top of the Euribor rate. Your interest rate is then reviewed and adjusted periodically - every 3 or 12 months depending on your chosen reference rate.

This means monthly mortgage payments can fluctuate significantly over the life of a loan. During periods of low Euribor rates, Finnish homeowners enjoy very affordable borrowing. When rates rise, as they did sharply in 2022–2023, monthly costs can increase substantially. Some banks offer fixed-rate periods (3–10 years) for borrowers who prefer predictable payments.

How it affects expats

• Variable costs: Your mortgage payment can change every 3 or 12 months as Euribor adjusts
• Interest rate cap: You can purchase an interest rate cap (korkokatto) to limit your maximum rate, though it comes at a cost
• Fixed-rate option: Some banks offer fixed periods for part or all of your loan
• useful for budgeting

• Comparison shopping: Bank margins vary, so compare offers from multiple banks before committing
• Tax implications: Interest on a loan for your own home is not tax-deductible (the deduction ended from tax year 2023)

Key details

• Euribor: The European interbank offered rate, set daily and used as the base for Finnish mortgages
• Bank margin: Typically 0.3%–1.0%, negotiable based on your financial profile
• Review period: 3-month or 12-month Euribor, determining how often your rate changes
• Korkokatto: An interest rate ceiling product that protects against extreme rate increases

Related terms

• Laina (Loan): types of loans in Finland

• Pankkitili (Bank Account): Finnish bank accounts

• Luottotiedot (Credit Record): credit history in Finland