Under FI's stricter amortisation requirement, which went into effect on 1 March 2018, new mortgagors with debt in excess of 450 per cent of gross income must amortise 1 percentage point more of their loan per year in addition to the existing requirement. The objective of the stricter requirement is to strengthen resilience of households by decreasing the number of mortgagors who have high debt in relation to their income.
This FI Analysis describes how Swedish covered bonds function, how the regulation governing the cover pool is designed and how the cover pool is affected by a fall in house prices.
A new report from Finansinspektionen and the Swedish National Debt Office shows that the value of an implicit state guarantee for the major Swedish banks has decreased since the financial crisis in 2008–2009. This decrease is due to higher capital and liquidity requirements on the banks, a new regulation for managing banks in crisis and improved market conditions.
Reference rates are important since they are used in many financial contracts, and it is therefore crucial that they are fair, transparent and accurately reflect the underlying market.
Theprevailing low interest rate environment is challenging for pension managers who pledge a guaranteed rate of return to their beneficiaries.
This FI Analysis presents an assessment of the Swedish mortgage cap. The analysis indicates that the mortgage cap has changed household behaviour. Households with new mortgages borrow less than what they would have done if FI had not implemented the mortgage cap. They are also buying less expensive homes.
Households with high loan-to-income ratios, i.e. large loans in relation to income, are vulnerable. They are sensitive to rising interest rates since their monthly expenses are affected more than households with lower loan-to-income ratios. They are also somewhat more sensitive to a loss of income, for example if they become unemployed.
This FI Analysis shows that the amortisation requirement has helped households with new mortgages change their behavior. New mortgagors are taking smaller mortgages than what they would have done if FI had not implemented the amortisation requirement. These households are also buying less expensive homes.
SUMMARY: In Sweden, both the percentage of mortgages that have a variable interest rate and household debts have risen sharply. This combination has made house-holds sensitive to rising interest rates.
The vulnerability indicators FI identifies in this analysis show a slightly elevated level of vulnerability for liquidity. Several indicators contribute to this.