In light of concerns around household debt levels, Financial Markets Minister Per Bolund announced on Thursday that tougher amortisation requirements will be introduced for homeowners as of 1 March 2018. All new mortgage holders who borrow more than 4.5 times their gross income will have to amortise at least 1% of the debt, in addition to the existing requirement.
The new requirement will have the most impact in Stockholm and Gothenburg, where property prices are highest. In Stockholm, 30% of all new mortgage holders will be affected.
Elisabeth Svantesson, the Moderate spokesperson on economic policy, is critical, pointing out that house prices are already falling and that such a measure could lead to a further drop in prices. She calls for major reform of the housing market instead.
Andreas Hatzigeorgiou, chief economist at the Stockholm Chamber of Commerce, believes the new requirement will do more harm than good and curb growth in the region.
The Swedish Financial Supervisory Authority, or FSA, said on Monday that all new mortgage holders who borrow more than 4.5 times their gross income must amortise 1 percentage point more of their mortgage per year than is the case at present. It will now be up to the Swedish government to decide what to do.
Opinion is divided, however. Housing Minister Peter Eriksson has openly expressed his doubts but Financial Markets Minister Per Bolund, who is the responsible minister, has warned of the consequences if the proposal is stopped.
The government intends to hold talks with the opposition, but Per Bolund is keen to stress that it will be up to the government rather than parliament to make a decision.
The opposition parties have in principle already said No to the proposal. Elisabeth Svantesson, the Moderate Party spokesperson on economic policy, argues that such a requirement would stop young people from buying a home and could fuel a downturn.
Housing Minister Peter Eriksson is doubtful about the new amortisation requirement and believes other alternatives ought to be considered.
On Monday the Financial Supervisory Authority (FSA) is expected to make a decision about whether to introduce new tougher amortisation requirements. The issue is a difficult decision for the government as giving the go-ahead could entail risks, but stopping the proposal would undermine the FSA.
On Wednesday Financial Markets Minister Per Bolund (Green) criticised the opposition, calling its stance against the proposal “irresponsible”. However, party colleague Peter Eriksson expressed his uncertainty. “I think the amortisation requirement that was brought in recently has had mainly a positive effect. In the situation we have now it is more uncertain. I think that other possible measures ought to be considered,” he says. His main concern is that it would slow down housing construction.
The Swedish Competition Authority (Konkurrensverket) has rejected the government’s plans to introduce an amortisation requirement, saying that the lack of competition in the banking market would worsen further.
Instead the Competition Authority wants new and tougher lending requirements to be imposed on the banks. Not only would banks be able to offer a range of services designed to suit customers better, but customers would be less likely to stay loyal to one bank for years, instead switching to the bank that provides the best offer.