A stable, well-functioning financial market for allA stable, well-functioning financial market for allThe Swedish Mortgage Market (2017)
Household debt is a crucial matter which FI monitors closely, and the mortgage survey is an important part of this work. Household debt has increased sharply in recent years. During the same period, mortgage rates have fallen and are now at historically low levels, and house prices have also risen rapidly. Finansinspektionen (FI) judges there to be an elevated risk that house prices will fall compared to a normal state, and it is more likely that interest rates will rise than that they will fall.
In order to manage the risks associated with household debt, FI has implemented several measures, such as introducing a mortgage cap, raising the risk weights on mortgages and, in June 2016, introducing an amortisation requirement. Together, these measures have contributed in recent years to making households with new mortgages more resilient, but their full effect on all mortgage holders will take many years to realise and is to some extent offset by other forces.
Amortisation payments on new mortgages have increased since 2011, and the amortisation requirement has further strengthened this development. The percentage of households that amortise and the average size of the amortisation payments increased sharply in 2016. This is in line with FI's previous expectations. FI's analysis shows that new mortgage holders subject to the requirement have changed their behaviour. They are both borrowing less than what would otherwise been the case and buying less expensive homes.
The average loan-to-value ratio for new mortgage holders has been relatively stable in recent years. The average loan-to-value ratio decreased to 64 per cent in 2016, which is one percentage point lower than in 2015. In the stock of existing mortgages, the loan-to-value ratio has been decreasing for several years and in 2016 was 48 per cent.
The total debt-to-income ratio for households with new mortgages decreased slightly in 2016 after increasing for several years. The average debt-to-income ratio was 402 per cent in 2016, compared to 406 per cent in 2015.
There continues to be a high percentage of both new and existing mortgage holders that have a high level of debt in relation to their income or in relation to the value of their home. These households could react more strongly to a fall in house prices or to rising interest rates and thus could amplify an economic downturn.
In general, new mortgage holders have good - and growing - margins for making their payments, and this positive trend continued in 2016. Households have become even more financially resilient to shocks according to FI's stress tests. Compared to previous years, more households can handle rising interest rates and unemployment without experiencing a deficit in their monthly payments compared to previous years.
