Swedes' borrowing increases at record pace

Swedish households increased their loans from banks and housing credit institutions by 53 billion kronor ($7.72 billion) in the third quarter, the highest increase ever recorded for July to September, Statistics Sweden (SCB) reported on Monday in its latest savings barometer.

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During this time, interest rates rose, with Sweden's central bank, the Riksbank, increasing the repo rate by 0.25 percentage points twice to 0.75 percent. However, the hikes did not deter Swedes from borrowing.

"One reason why loans continued to increase could be that there were strong incentives to buy a home before the household loan ceiling went into effect on October 1st," the agency said in a statement.

At the end of the quarter, the total volume of loans handed out by banks and housing credit institutions amounted to 2.37 trillion kronor.

At the same time, households continued to sell shares and equity funds in the third quarter even as the Stockholm Stock Exchange netted a 10 percent gain during the period.

A total of 4 billion kronor in shares and 3 billion kronor in equity funds were sold during the quarter, compared with 7 billion kronor of shares and 4 billion kronor of equity funds in the second quarter.

Despite the share sales, households increased their assets in shares by 49 billion kronor and equity funds by 12 billion kronor as a result of the growth in the stock market.

The stock market growth resulted in an increase of total household share wealth to 579 billion kronor at the end of the quarter, the highest value since the fourth quarter of 2007.

However, the levels are still far below the peak experienced In second quarter of 2007, when share wealth amounted to nearly 700 billion kronor.

In addition to equity funds, net purchases in other funds, including mixed funds and funds-in-funds, amounted to slightly over 20 billion kronor in the last six months, of which 2 billion kronor were purchased in the third quarter.

However, following sharp demand during the financial crisis, interest for bond and money market funds has weakened recently.

Bond and money market funds now consist of less than five percent of total fund assets, with households making net sales of bond and money market funds of less than 500 million kronor in the third quarter.

Separately, household financial savings, or transactions in financial assets minus liabilities, amounted to a 15 billion kronor shortfall in the third quarter, the lowest financial savings figure since the fourth quarter of 2006.

The low financial savings in the quarter resulted largely from a combination of households selling shares, equity funds and bonds and at the same time, increasing their loans during the quarter.

However, the net wealth of households, or financial assets minus liabilities, amounted to 3.26 trillion kronor, an increase of 158 billion kronor compared with the previous quarter.