Swedish households borrow up to 70 per cent of the value of their home on average, and indebtedness is high in a historical and international perspective. At the same time, Finansinspektionen’s (FI’s) annual mortgage survey shows that fewer than one household in ten are granted loans that exceed 85 per cent of the value of the home, and such households amortise at a rapid rate. Households also have sound repayment ability.
FI closely monitors developments on the mortgage market, because high indebtedness makes households vulnerable and could pose risks to the economy at large. A number of measures have also already been taken or announced to reduce such risks, such as the introduction of the mortgage cap and increased risk weights for mortgages.
This year’s mortgage survey shows that households generally have sound resilience and repayment ability. The mortgage cap introduced just over three years ago is effective. The vast majority of households currently have mortgages below 85 per cent of the value of the home, providing protection from e.g. a drop in house prices or loss of income. Households with loan-to-value ratios exceeding 85 per cent amortise at a rapid rate.
The survey also shows that eight out of ten households with loan-to-value ratios exceeding 75 per cent amortise. This marks a reduction from last year, when nine out of ten amortised, but is still higher than the six out of ten that amortised the year before. The number of households with a loan-to-value ratio just below the mortgage cap, i.e. between 75 and 85 per cent, has risen.
FI wants to see a strengthened amortisation culture in Sweden. It is important that mortgage customers are given the possibility to make wise decisions about amortisation, and that they understand how amortisation affects their personal finances in the long term. So, in the autumn of 2013, FI submitted a proposal regarding banks providing new borrowers with individually tailored amortisation plans when granting new loans. This is now being implemented by the Swedish Bankers’ Association.
At 10 a.m. today, Finansinspektionen will hold a press conference at which Chief Economist Henrik Braconier and Analyst Hanna Karlsson will present conclusions from the report. There will a webcast of the press conference.
