This FI Analysis shows that the the increase in house prices is the primary reason it has become more difficult for young adults to buy a home.
FI’s Director General participated in the seminar Evolution of Mortgage Finance arranged by Stabelo for a broad group of institutional investors.
High debt can mean risks for individual households, banks, financial stability and macroeconomic development. The mortgage survey serves as an important basis for the assessment of the risks associated with household debt.
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.
New mortgagors are amortising, borrowing less and buying less expensive homes, but many still have high debt. These are FI’s conclusions in this year’s mortgage report. FI is also publishing an FI Analysis that shows the stricter amortisation requirement has reduced the percentage of borrowers with high debt in relation to their income.
In Sweden, the traditional bank-based financing model for issuing and financing mortgages is currently being supplemented by models where mortgages are being financed in new ways, e.g. alternative investment funds (AIF).
Sweden’s traditional bank-based model for granting and financing mortgage loans is challenged by new firms with alternative financing models.
Most loans for consumption are small and have a high effective interest rate and a short maturity. Households with large loans represent the largest share of new lending, though, and the large loan segment is growing the fastest. Households with high income have the largest loans. Borrowers with mortgages normally have larger consumption loans than borrowers without mortgages. These are some of the results from FI’s mapping of consumption loans, Swedish Consumption Loans 2018.
Household debt is continuing to rise. The number of new mortgagors with a high level of debt in relation to their income or the value of their home continues to be high. These are the conclusions drawn by Finansinspektionen (FI) from this year’s mortgage survey, which is being presented today. FI also highlights how tenant-owner associations’ debt increases the risks for households.
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.
Finansinspektionen (FI) follows the development of household debt on an ongoing basis. The mortgage survey serves as an important source of data for this work. High debt can mean risks for individual households, banks, financial stability and the macroeconomic devel-opment.
Finansinspektionen is responsible for macroprudential policy in Sweden, which includes both promoting financial stability and counteracting financial imbalances. We are also tasked with promoting a high level of consumer protection on the financial markets. One of the reasons that we have been given the responsibility for macroprudential policy is that financial crises have proven themselves to be very expensive.
FI is proposing changes to Finansinspektionen’s regulations (FFFS 2016:16) regarding amortisation of loans collateralised by residential property. The regulations cover mortgages granted by credit institutions, i.e. banks and credit market companies.
Finansinspektionen (FI) is presenting today its proposal for a stricter amortisation requirement. Following a decision by FI’s Board of Directors, the proposal is now being submitted to the Government for approval.
The Swedish economy is thriving, but a strong economy combined with low interestrates has resulted in high asset prices and rapidly rising household debt.
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.
Finansinspektionen’s report, Stability in the Financial System, shows that the high level of household debt and rising house prices are causing vulnerabilities to build up in the Swedish economy. FI therefore would like to introduce a stricter amortisation requirement for new mortgage holders who take large loans in relation to their income.
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.
Household debt is a crucial matter which FI monitors closely, and the mortgage survey is an important part of this work. Household debt has increased sharply in recent years. During the same period, mortgage rates have fallen and are now at historically low levels, and house prices have also risen rapidly. Finansinspektionen (FI) judges there to be an elevated risk that house prices will fall compared to a normal state, and it is more likely that interest rates will rise than that they will fall.
The amortisation requirement that was introduced last year has had a slow-down effect thus far. Households with new mortgages are borrowing less and buying less expensive homes, but the risks associated with high household debt remain.