The average private lending rate increased by 0.09 percentage point from  2  BIS Review 38/2010  the third to the fourth quarter, but the December interest rate increase will probably only feed through in 2010. Weighted mortgage lending rates have increased by a quarter percentage point since the key rate was raised for the first time in October. The fall in business investment seems to be nearing an end. Information from the regional network indicates that investment in private services will pick up this year. Manufacturing enterprises in the regional network report that investment will fall between 2009 and 2010. Corporate credit growth is still on the decline, but Norges Bank’s fourth-quarter survey of bank lending showed that banks have eased credit standards for the corporate sector. Commercial building starts have picked up slightly since summer. Housing investment fell sharply between 2007 and 2009. Turnover of new homes has increased and house prices have risen markedly. Housing starts are expected to increase ahead. Household credit growth has been stable in recent months. Growth in private consumption increased through 2009 and growth is expected to continue. In spite of a lower interest rate level, the household saving ratio increased to a record-high level in 2009. This probably reflected high household debt levels with a need for some households to consolidate, and a large degree of uncertainty owing to prospects of higher unemployment and a fall in the value of housing wealth. At the same time, household real disposable income increased.
If economic developments are broadly in line with projections, a fiscal stance in line with the fiscal rule could result in a lower interest rate and a weaker krone than projected. The Government has estimated that the annual return on the fund will be around 4 per cent over time. The average real return since the management of the fund began is now 2.7 per cent, up from just 1 per cent a year ago. The figure reflects the recent recovery from the sharpest deterioration in capital markets since World War II. With an unchanged risk profile, the average return will most probably move back towards 4 per cent after a period. The investment strategy of the fund is built on its long-term investment horizon and substantial size. In 2009, we benefited from the long-term investment horizon. The return on the fund was 25.6 per cent in 2009, which is the highest return ever recorded. The fund’s long-term investment horizon enabled it to buy equities and maintain its positions in corporate bonds when other investors were forced to sell assets at low prices during the financial crisis. In June 2007, the Ministry of Finance decided to increase the allocation to equities from 40 to 60 per cent. This was achieved over the two following years when equities for more than NOK 1 trillion were purchased. The long period of phasing in purchases was profitable as the fund was able to exploit falling equity prices during the financial crisis.