The total net interest for Sweden’s big four banks amounted to around SEK 30 billion for the second quarter – an increase of over one billion kronor since last year. The profits come mainly from mortgages.
“This is a completely unreasonable figure,” says Håkan Larsson, housing economist at the Swedish Homeowners Association. Håkan Larsson says that the development is due to the low repo rate, which has meant there is a huge difference between the interest banks themselves pay and what they offer mortgage customers.
During the same period mortgages have grown in importance for banks. For Swedbank and Handelsbanken, the mortgage share of the group rocketed from 25% in 2010 to 49% and 42% respectively in 2015.
Håkan Larsson points out that the four big banks have very similar interest rates for mortgage customers, calling it a price-fixing cartel. He believes politicians ought to act and the state SBAB bank ought to lead the way by bringing down interest rates.
The Swedish Financial Supervisory Authority (FSA) has warned of the growing number of indebted households and now FSA boss Erik Thedéen is calling in the banks to stop growth in lending. “The intention of the discussions is that they will together lead to a more restrictive position for high debt ratio lending,” says Erik Thedéen.
Harry Flam, professor in international economics, soon to be chair of the Swedish Fiscal Policy Council, agrees. However he disagrees that the introduction of a debt ratio ceiling, a maximum loan in relation to disposable income, is the right way to go. Instead he wants to see a cautious lowering of interest rate deductions.
The Swedish Financial Supervisory Authority (FSA) has proposed that the country’s banks should stress test their risk of major financial loss, which could result from climate change.
For instance, the banks should review how their borrowing and assets would be affected if there were a hike in the price of emission rights, or if fossil assets such as oil and gas could not be extracted as a result of tougher regulation.