Economists wary of Ingves’ plan

As a means of curbing soaring house prices and household debt levels, Riksbank Governor Stefan Ingves has proposed the introduction of a debt ratio ceiling, limiting the size of loans an individual household may take in relation to income.

A debt-to-income limit of 400%, tighter rules on mortgage repayment and a 50% cut in the interest deduction would slow the increase in the debt ratio, according to Mr Ingves.

Tor Borg, chief economist at SBAB, sees a risk in introducing all three measures at once, saying that such a move could trigger a recession.

Anna Öster, chief economist at Länsförsäkring, is also critical. She believes it is “unfortunate” that the focus is on trying to reduce the housing demand. Caution is vital since such a move could trigger a housing market crash and have a serious impact on the Swedish economy, she says.

Both Tor Borg and Anna Öster would instead like to see an increase in housing construction.