A stable, well-functioning financial market for allA stable, well-functioning financial market for allThe Swedish Mortgage Market
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.
Household debt has been rising for a long time at a higher rate than household disposable income. One important reason for this is that house prices have been rising rapidly. In order to manage the risks associated with household debt, FI has taken several measures, such as a mortgage cap, raising the risk weights on mortgages and, in June 2016, the introduction of an amortisation requirement. These measures have made households with new mortgages more resilient. In order to further strengthen the resilience of households, FI introduced a stricter amortisation requirement on 1 March 2018.
The average loan-to-value ratio for new mortgagors decreased slightly in recent years and was 63 per cent in 2017. For the total stock of mortgages, the loan-to-value ratio has been decreasing over a period of several years and amounted to 55 per cent in 2017. For households with new mortgages, debt in relation to net income (debt-to-income ratio) on average was 411 per cent of net income in 2017. This was an increase from 402 per cent in 2016. The number of new mortgagors with a high level of debt in relation to their income or in relation to the value of their home continues to be high. These households may amplify a future crisis by sharply reducing their consumption.
The percentage of households that amortise and the average size of the amortisation payments increased following the implementation of the amortisation requirement in 2016 and remained at the same level in 2017. FI's analysis shows that households with new mortgages that are subject to the amortisation requirement borrow less and buy less expensive homes than what they would have done without the amorti-sation requirement.
According to FI's stress tests, households with new mortgages are able to make their payments on their mortgages with a strong margin. Compared to previous years, more households can handle rising interest rates and unemployment without their monthly expenses exceeding their budget.
Household resilience indicates a limited risk that banks will experi-ence widespread losses from household mortgages. However, house-holds may reduce their consumption if their circumstances deteriorate, and such a development would thus have a negative effect on the state of the economy.
