Since 2010, FI has implemented a number of macroprudential measures aimed at increasing the resilience in the financial system and subduing the risks associated with high and rising household debt. These measures include tightening the capital requirements on banks and introducing a mortgage cap and two amortisation requirements. In this report, we present an overall assessment of these measures, with a focus on the measures that, via lenders, place restrictions on households’ mortgage borrowing.
The mortgage cap and amortisation requirements have had intended effect and subdued household debt. They are slowing a scenario where new mortgagors borrow more, taking larger loans in relation to the value of the home or their income. These are the conclusions of Finansinspektionen’s (FI) evaluation of the macroprudential measures implemented in Sweden.
The temporary amortisation exemption resulted in new mortgagors borrowing almost 4 per cent more and buying homes that were approximately 1 per cent more expensive, concludes a new FI Analysis.
New borrowers are continuing to take larger mortgages in relation to their income and the value of their home, according to this year’s Swedish Mortgage Market, which is being presented today by Finansinspektionen (FI). FI also announces in the report that the temporary exemption from the amortisation requirement will end on 31 August.
New borrowers continue to take larger mortgages in relation to their income and the value of their home. At the same time, they have good margins for servicing their loans under weaker economic conditions.
FI has decided to extend the risk weight floor by one year, from 30 December 2020 to 30 December 2021.
Aggregate statistics indicate that Swedish households are holding significant assets in the form of cash, bank savings, fund shares and securities. The overall value corresponds today to an average of SEK 1 million per household. However, because these economic buffers are unevenly distributed between households, the average is a poor measure for assessing the risk of a significant drop in consumption following an economic shock.
Large credit losses can result in otherwise profitable banks reporting a loss. This FI Analysis describes a methodology for estimating how large credit losses can be in a stressed macroeconomic scenario.
The European Commission has announced that it does not intend to object to FI's intention to extend the current risk weight floor for Swedish mortgages. This means that FI may implement the measure.
The tax rebate for interest expenses – the interest deduction – means that households borrow more, and can and want to pay more for homes. This means that the households experience an increase in both their liabilities and assets, which in turn could have an impact on the stability of the financial system. In this FI Analysis, we calculate the impact of a change to the interest deduction. The reason for this analysis is the direct link between interest deductions and households’ loans.