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Interest rate hike or not - Swedish mortgage lenders are vulnerable nonetheless


There is not much talk about Swedes' indebtedness - it has stabilized - at a very high level. A minus interest rate with a ten-year boom, interest deductions and delayed property tax is a wonderful risk cocktail for Swedish households.

If you are heavily indebted to your income, you are vulnerable to a "financial shock": read unemployment, divorce, illness - things that we cannot predict but that affect us and even our economy.

With the mortgage ceiling and stricter amortization requirements for those with the largest liabilities in relation to their income, Finansinspektionen has tried to sue in the creek.

Some of the most indebted

But Swedish households and especially households in the big cities remain heavily indebted. The European Systemic Risk Board (ESRB), which analyzes the risks in the financial system in the euro area, noted as late as the end of September this year that Swedish households are some of Europe's most indebted households.

There are still too many households that do not pay off at all, and debts have increased much more than income. In Stockholm, a debt that is four times your annual income is not uncommon, in smaller cities it is also high but not at those levels, according to the Riksbank.

Despite a stabilization of the Swedes' debts, authorities such as the ESRB still call for more measures to make the Swedes borrow less. A gradual abolition of the interest deduction is high on their list. And they are crystal clear, the Swedes pay too much for their housing: "highly overvalued" is a concept that recurs.

More vulnerable

In SVT's loan and interest rate illustration you can see how interest-rate-sensitive an average household is in your particular municipality. It becomes obvious that housing price developments make metropolitan residents more vulnerable if interest rates reach a more normal level.

In the present, concerns are perhaps greater for an economic slowdown than for an interest rate shock. But even there, the debts and overvalued housing make mortgage borrowers in big cities more vulnerable.

And among other things, the Riksbank is worried that as the economy turns down, we can make the crisis even deeper by buying less and paying off our loans instead. They call households' high mortgage lending the biggest threat to the Swedish economy. What is good for the individual can be difficult for the system.

Source: svt

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