Sweden’s recovery from Financial Times
Sweden’s economic recovery threatened by potentially volatile housing debt market
Unlike other countries in its Nordic neighborhood, the vast majority of Swedes do not pay off the mortgages on their homes – dying in debt and many having only paid the interest on the loan itself rather than the principal. A financial group in Sweden has come under fire recently for suggesting new rules that would up the prices of new home loans to stymie what many finance analysts see as a growing housing bubble in Sweden. The organization, Finansinspektionen, sets the rules that Swedish mortgage providers follow and its suggested reforms were aimed at stabilizing the housing market. The reform – a requirement that all mortgage holders be required to pay back their loan in part – would have led to home owners paying back a minimum of 30% of the value of their loan at a rate of 2% a year. The plans were scrapped after a Swedish administrative court of appeal in Jönköping suggested the reforms would not conform with Swedish law.
We have to conclude that the appeal court has made a different assessment. It has pointed to uncertainties in the law, making it impossible for us to push on with the amortization requirements.
Finansinspektionen’s acting director general Martin Noréus
Reforms proposed by Finansinspektionen to place mortgage repayment on a set schedule by law
The vast majority of personal debt in Sweden is held in the form of mortgages on personal housing, with the average value of a mortgage at least 3.7 times the annual income of the debtor. Most people actually die in debt before repaying their mortgage according to a study by Sweden’s central bank in 2014. Finansinspektionen argues the reforms are necessary to prevent a housing bubble from bursting.