Riksbank probes mortgage-repayment law
Published: 15 Jan 13 12:54 CET | Print version
Online: http://www.thelocal.se/45624/20130115/
The head of Sweden's central bank, Stefan Ingves, said on Tuesday that the government could be forced to make Swedes pay off their mortgages if the country's banks don't "take the responsibility" themselves.
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"It creates huge risks if the loans have an eternal life."
At present, it is relatively common for Swedes only to focus on their monthly interest rate payments rather than attempting also to pay down the principal on their mortgages.
"In most other countries, people pay down their mortgages to varying degrees. We're heading into a different world where we start to look like the odd one out and that increases the risks," Ingves told the TT news agency.
The best solution, according to the Riksbank head, would be if the banks could sort out the current system's shortcoming themselves "without being forced by others".
Sweden's Financial Inspectorate (Finansinspektionen, FI) is currently investigating how the system has been working so far.
"I think mandatory rules should be introduced if sufficient action is not taken [by the banks]. You can't just expect someone else to do everything," Ingves said.
"If the banks don't take the responsibility, then it will be up to the government," he said.
A spokeswoman from the SEB bank, Anna Helsén, said the bank agrees that the issue is important, but that steps are already being taken to tackle the problem.
"This is something the banks can decide, there's no need for legislation," she told TT.
"We have introduced a requirement for the home-owner to repay anything that exceeds 70 percent of the property's value. Mortgage payments are good for the customers themselves."
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As far as I know, in any part of the world, when you pay off your mortgage part of your contribution goes towards the interest and the house ( usually the contribution is higher towards the interest).
Do the people in Sweden have a choice to leverage their contribution between the two? If so, I think they are smart to pay off the interest. No?
guys, what do you think of JAK BANK?
As we've seen in Ireland, UK, Greece, Spain etc, greed combined with fraud led to the collapse of their banks leading to bail outs and austerity measures. However, IMHO... Sweden is in a stronger position to deal with these situations as the aftermath of 2008 has proven.
2. There is no law that prevents one from amortization. If one wishes to pay that they can do it.
3. The govt. should think serious to improve the housing situation. People need rental apartments. If the rental apartments are plenty, then people with less income can live rentals where as richer ones can buy with suitable amortization. This is the situation in many countries.
Nice comment, we can however expect the government to pull their heads out of the sand and fix the current housing mess. It's all well and good to force people to repay debt but this will effectively suck money out of the economy by reducing consumer spending as people will be repaying debt rather than buying those new jeans and secondly the people looking to buy their first home, well, you'll just need to keep saving for a few more years until you can afford the higher repayments. One can expect the banks are wise enough to take care of their own risk.