New mortgages must be amortised down to 50 per cent of the value of the residential property. The amortisation requirement will apply to all new loans that are collateralised by a residential property. The property may be revalued every fifth year.
Borrowers who increase existing mortgages after 1 June to a loan-to-value ratio that exceeds 50 per cent may be offered the option of instead amortising the additional loan over a period of ten years. The rules apply to all banks and credit market companies as of 1 June 2016.
Finansinspektionen is responsible for macro-prudential policy. As part of this assignment, FI makes the assessment that an amortisation requirement is needed in Sweden. An amortisation requirement would curb indebtedness. Lower indebtedness increases the resilience of households to shocks and reduces the risk of the Swedish economy being negatively affected as a result of unforeseen events in Sweden or abroad.
New mortgages with a loan-to-value ratio above 70 per cent must be amortised by at least two per cent of the original loan amount each year. Loans that have a loan-to-value ratio below 70 per cent must be amortised by a minimum of one per cent annually until the loan-to-value ratio has reached 50 per cent.
For existing mortgages raised before 1 June 2016, additional loans may be paid either in accordance with the basic rule or over a period of ten years. The option of amortising an additional loan over a period of ten years has been added to avoid threshold effects for households with existing mortgages that are thus not subject to the amortisation requirement.
If an agreement for the purchase or production of a residential property was entered into prior to 1 June, the loans that are raised after this date to finance the purchase or production are not subject to the amortisation requirement.
The rules apply only to new mortgages. The requirement does not apply if a borrower only wishes to switch banks.
Regulations regarding the amortisation requirement have been sent to the Government today for approval. The regulations shall enter into force on 1 June 2016.
FI will hold a press conference at 10:00AM today. Erik Thedéen (Director General) and Per Håkansson (Chief Legal Counsel) will be present. The press conference will be held at FI's premises at Brunnsgatan 3 in Stockholm.