The Swedish Mortgage Market (2021)

New borrowers continue to take larger mortgages in relation to their income and the value of their home. At the same time, they have good margins for servicing their loans under weaker economic conditions.

The trend from the past two years of new borrowers taking larger loans continued in 2020. Both the average loan-to-value ratio and the average loan-to-income ratio increased in 2020. A growing percentage of new borrowers thus has a high loan-to-value ratio or a high loan-to-income ratio. However, new borrowers also have good margins for servicing their loans under weaker economic conditions. Since more new borrowers have taken larger mortgages in relation to their income, they are more sensitive to higher interest rates than before. Even if relatively few mortgagors experience a deficit in their personal finances following an increase in interest rates, in general they need to use a significantly larger portion of their income for interest rate payments.

FI's mortgage report also shows that loans that are added to existing mortgages, so-called home equity withdrawals, constitute a larger share of the new loans in 2020. The average home equity withdrawal was also larger than in previous years. The increase in home equity withdrawals can be due to more households wanting to renovate their homes during the pandemic.

FI introduced a temporary exemption from amortisation payments in April last year to allow households with mortgages greater financial manoeuvrability in uncertain times. As of January 2021, a total of 230,000 households in the banks' mortgage portfolios had been granted a temporary exemption. In our sample of new borrowers in 2020, roughly 9 per cent had applied for and been granted exemption from amortising all or parts of their new mortgages. For the new borrowers in the sample, the gain was on average SEK 4,500/month.

Since the spring of 2020, the macroeconomic development has stabilised and the outlook for Sweden's economy is brighter. Therefore, FI has made the decision that the temporary exemption will not be extended; it will expire on 31 August 2021.