• Sweden edition
Borg rejects call for mortgage-repayment law

Borg rejects call for mortgage-repayment law

Published: 17 Jan 2013 16:53 GMT+01:00
Updated: 17 Jan 2013 16:53 GMT+01:00

Stefan Ingves, head of the Swedish central bank, proposed that Sweden had to get to grips with the high level of household indebtedness.

One solution, he proposed, was to legislate so that loan takers have to make regular payment on the debt owed, rather than simply nipping away at the monthly interest rate payments.

SEE ALSO: Riksbank probes mortgage-repayment law

Borg was not impressed.

"I think we should follow the plan we have already outline," he told Svenska Dagbladet (SVD) newspaper.

"We need to increase the banks' capital reserves and review risk-weighting of housing loans."

He warned that a sudden political move could affect the housing market too drastically.

"We will be looking at how we make Swedish banks less dependent on foreign currency, which run the risk of currency rate fluctuations," Borg told SVD.

"Then we'll see how the households react. We need to tackle the indebtedness step by step."

TT/The Local/

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Your comments about this article

20:05 January 17, 2013 by eurobloke
I would agree with Mr Ingves on the idea of mandatory mortgage payments. The growth of interest-only mortgages was one of the reasons why the British property bubble grew and then went pop. Finance Minister Borg should anyway take advice from such senior people, he may not agree or accept but heal to the information as needed.
21:36 January 17, 2013 by Mib
@eurobloke The reason that the UK property market crashed albeit softly in London and the suburbs and are typically worth more today than they were in 2007....was due to self certification and overstating incomes, speculators who bought too many properties and stretched too far believing the market would grow forever....a massive credit crunch in 2008 etc etc...greedy banks throwing money at peopl too cheaply ie. Today someone was sentenced to 7 years in jail for defrauding £750 million from banks!! What was the bank doing lending that amount without checks?. Sweden did not and does not have that type of property market. However as Borg stated, the banks need to increase their reserves and combined with a minimum 15% deposit rule and probably more regulations coming in, then it will be a better way than legislating for repayment mortgages at the moment in a delicate economy.

There has to be a fundamental change in thinking, by changing the rental laws to be allowed to charge market rates and a massive increase in building new homes which has to be a partnership between the Government and private property coampanies. Until that happens, property prices in prime cities like Stockholm will increase further as demand outweighs supply with pressure from a lack of rental property!
09:45 January 18, 2013 by skogsbo
a phased in repayment system seems logical. Banks slowly increased their reserves and reduce risk. The public slowly lower personal debt. No bad thing for either and the market doesn't feel the impact of full immediate implementation.
21:39 January 18, 2013 by smilingjack
Id never heard of the interest only system until being in sweden. then again australia has one of the worst pension / social welfare systems in the world. paid maternity leave started only a few years back and it is mnimal at best.

now I understand why there are so many new cars floating around stockholm. still with such a good publc transport system in stockholm why would you spend 700,000 kr to park it in the street?
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