FI Analysis 20: Fewer home equity withdrawals after amortisation requirements

This FI Analysis shows that households’ tendency to use mortgages for purchases other than buying a home decreased following the amortisation requirements.

Home equity withdrawals constitute a large portion of the new mortgages issued in Sweden. However, the amortisation requirements have reduced household demand for these types of withdrawals. This change is most evident following FI's first amortisation requirement, which entered into force in 2016. Fewer households that had large existing mortgages withdrew equity, and those that did withdrew a smaller amount after the requirement went into effect. Following the introduction of the requirement, total home equity withdrawals decreased by just over 9 per cent.

A large credit supply, a long period of low interest rates, and rising house prices have meant that households have faced favourable conditions for home equity withdrawals. An increase in home equity withdrawals can be associated with macroeconomic risks. The decrease in home equity withdrawals following the amortisation requirements has also decreased the percentage of mortgagors with high debt. This has probably slowed a development where households use mortgages to finance something other than the purchase of a home.

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