A stable, well-functioning financial market for allA stable, well-functioning financial market for allFI-analysis 4: A model for household debt
This FI-analysis introduces a model for household debt in Sweden.
Household debt is closely linked to house prices, and both of these are determined by interest rates and economic outlooks, as well as by one another. The estimated properties of the model are reasonable; the model reacts as expected to shocks and on the whole its historical forecasts agree well with the outcomes. This means that we can use the model as support for FI's analysis of household debt.
The article describes two scenarios showing potential developments in household debt in the coming periods.
The base scenario is based on the National Institute of Economic Research's (NIER) assessment of future macroeconomic developments. In this scenario, house prices and household debt rise by 9.5 and 6.4 per cent annually respectively during 2015, and then increase at a somewhat slower pace in the following years. The debt-to-income ratio stabilises around 185 per cent towards the end of 2017.
In the second scenario, it is assumed that house prices will grow much faster in 2016. This means that debt will also grow faster and the debt-to-income ratio will then reach almost 190 per cent in 2018.
