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.
A leverage ratio requirement could contribute positively to financial stability during normal conditions in that it increases the robustness of banks' capital adequacy.
FI has identified a number of quantitative indicators that point toward factors in the insurance sector that could have an effect on financial stability. These indicators show that there was good resilience in the insurance sector at the end of the year.
House prices have been rising and, as a result, so has the debt of households in relation to their income – i.e. their debt-to-income (DTI) ratios. A DTI limit could slow this trend, but limiting households' opportunities to borrow would also slow consumption and economic activity.