FI-analysis 17: Fewer Vulnerable Households after Stricter Amortisation Requirement

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 evaluates how the stricter amortisation requirement has affected the size of the loans taken by new mortgagors and the purchase prices of the homes they are buying. Households affected by the stricter amortisation requirement are borrowing on average 8.5 per cent less than they otherwise would have done. They are also buying less expensive homes. However, the stricter regulation only affects a small percentage of all new mortgagors. Subsequently, the total effect is limited; new mortgagors are buying homes that on average are 1.1 per cent less expensive and borrowing on average 1.5 per cent less following the introduction of the stricter amortisation requirement. The effect of the stricter requirement is less than what FI expected (see Finansinspektionen, 2017b). This is because the new requirement affected fewer households that took out a new mortgage , and those that were did not need to increase their amortisation payments as much as FI had estimated they would.

The households that adapted their behaviour the most because of the stricter amortisation requirement were single-person households and the oldest group of mortgagors. Those affected by the new requirement are buying less expensive homes and borrowing less regardless of where they live in the country. However, because more households in Stockholm and Gothenburg are affected than in other regions, the growth rate of mortgages and housing demand slowed the most in these two cities. Furthermore, mortgages also shrank among new mortgagors with the highest income. This is also due to the fact that this group was most affected by the stricter requirement

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