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.
This FI Analysis describes how Swedish covered bonds function, how the regulation governing the cover pool is designed and how the cover pool is affected by a fall in house prices.
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.
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.
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.
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.