A stable, well-functioning financial market for allA stable, well-functioning financial market for allThe development on the mortgage loan market
The banks’ risk exposures to the Swedish mortgage loan market have increased due to higher mortgage levels and long amortisation periods. The mortgage lending to Swedish households constitutes the largest exposure in the majority of the banks.
At the present time, FI does not assess that the accumulation of risks in the mortgage lending to be isolated to such an extent that it poses a threat to the stability on the Swedish financial market, not even in the event of a relatively major decline in housing prices. Declining house prices can, however, affect individual households, particularly if they coincide with increased unemployment, for example. In a similar way, there is a risk that any problems in mortgage lending for the banks will coincide – and even intensify – an otherwise negative global trend. Real estate prices have increased greatly during the past year, and FI sees a number of future risk factors. FI is therefore going to carefully monitor the development.
The increase in housing prices over the past few years is partially due to the fact that the customer's cost per borrowed Swedish krona has declined. This development is probably also due to historically low interest rates and the fact that the banks' lending costs have declined. This, in combination with increased competition between the banks, like everything else has reduced the customers' interest costs.
FI's investigation shows that:
- The mortgage levels in new lending have increased. In the entire portfolio, the lending level amounts to 59 per cent.
- The periods of amortisation have become longer. The actual amortisation periods amount to 91 years which can be related to the amortisation periods according to plan which are 37 years. One reason for the long amortisation periods is that nearly all banks accept straight mortgage loans secured by priority right.
- The banks' willingness to take risks varies. A typical customer in the investigation was allowed to borrow SEK 2.6 million in the most restrictive bank and SEK 5 million in the most lenient bank. From a stability perspective, these differences do not constitute a problem, as long as the bank makes a thorough investigation into credit eligibility. From the consumers' perspective, the possibility of borrowing increases if the banks have different standards for granting loans. However, the customer should always be informed of the loan's consequences and risks for the customer's personal finances.
