• Sweden's news in English

Mortgages could be capped at 85 percent

TT/The Local · 5 May 2010, 15:37

Published: 05 May 2010 15:37 GMT+02:00

Facebook Twitter Google+ reddit

"It is about protecting households from over-borrowing and about slowing the growth in borrowing, which is not a good thing in the long term," said Financial Markets Minister Mats Odell, who was presented with the proposals on Wednesday.

The agency believes excessive indebtedness makes borrowers vulnerable when property prices decline and they are forced to sell their homes. It hopes to make the guidelines effective by October 1st.

In Sweden, household debt is dominated by domestic mortgages, the authority reported, adding that the purpose of its proposal is to curb an unhealthy trend in the credit market in which credit institutions have increased loan-to-value ratios to steal a march on their competitors. Such a development could possibly expose consumers to unacceptable risks and eventually damage confidence in the credit market as a whole.

The proposed limit would apply to new loans or extensions to existing home mortgages. Renegotiating existing loans or replacing loans that have previously been issued by another credit institution are not covered by the guidelines, as long as the amount of the loan is not increased.

Odell said he likes the proposal. Neither Odell nor the agency believes that the rules will have a substantial impact on housing prices.

However, Hans Lind, a professor of real estate economics at the Royal Institute of Technology (Kungliga Tekniska högskolan, or KTH) believes that the mortgage cap will slow the housing market.

Story continues below…

At the same time, he added, "I think it is the right step to take. It is a way to make people to think, 'Can I really afford this?'"

Real estate agent association and mortgage institute Swedish Housing Finance Corporation (Sveriges Bostadsfinansieringsaktiebolag, or SBAB) slammed the proposal, which it believes will lock many young people out of the housing market. It believes that young people do not have sufficient time to save up for a down payment when they buy their first home.

Related links:

TT/The Local (news@thelocal.se)

Facebook Twitter Google+ reddit

Your comments about this article

17:33 May 5, 2010 by Kronaboy
Makes sense to me if you want to avoid 110% mortgages.
17:52 May 5, 2010 by Nemesis
This is a good idea.

I wish they would make this law in UK and Ireland as well.

I have seen so many people getting mortgages of 100% to 120% and then ending up with negative equity or unable to pay there bills.

Mortgages of 100% to 120% create bubbles in the economy and can bust it. Just look at Ireland.
18:50 May 5, 2010 by Mib
The SBAB should realise that the reason why prices are too high for first timers is that excessive loans have been handed out to too many people. With this proposal, it will lower the risks of people defaulting and ensure a more realistic rise in property values in the medium time.
19:43 May 5, 2010 by Greg in Canada
Ditto for agreement. A large part of the reason Canada didn't have a USA style mortgage crash was due to tighter bank lending regulations.
20:25 May 5, 2010 by planet.sweden
The banks already insist on 10 percent and it hasn't stopped the housing market running away. 15 percent is not much of an improvement on that and will have minimal impact.

I would have thought 25 percent was the minimum necessary to cool the market and prevent people from over borrowing.

All Finansinspektionen needs is a bit of courage.
21:55 May 5, 2010 by DAVID T
All very well if you also have the choice to rent - which we don't have in Stockholm
22:01 May 5, 2010 by hardonforswedes
good increase it please to 90% and avoid the UK and Irish problems..for once the swedes are smart :)
08:36 May 6, 2010 by karex
It all sounds good in theory but in practice it doesn't work well. Sounds like most people commenting here have never lived in a country where 25% dowpayment is required to purchase a home.

In practice it means that owning your own home turns into a dream that many cannot ever reach. Those who do rarely are able to before the age of 40. The reality is that either you pay rent or save up for the downpayment, especially if you have a family to support. This also means normally raising your children in a cramped apartment, not a parent's dream situation. Unless of course you're lucky enough to live with your parents for 10 years or so, then you might be able to pull this off at around age 30, provided they don't charge you rent too.
12:55 May 6, 2010 by Kronaboy

nobody is sticking a gun to your head, move????
14:34 May 6, 2010 by Puffin
100% mortages have always been possible in Sweden - you just had to pay more for them with 'top-upp' loans
15:46 May 6, 2010 by kenny8076
lol Kronaboy, so lame and irrational. Thats the reason developed country's HAVE immigration problems, they dessert their country when something doesn't make since. DAVID is right, maybe if they focused on housing for EVERYONE, buying wouldn't be the ONLY option. The local just did a report on the living situations in Sweden and Stockholm is the worst of 7 cities in Europe studied. The average wait for an apartment in Stockholm is 104 weeks or 2 years. I have been on waiting list in 3 cities in Sweden since June 2009 and in one city i have moved up to the 6000th spot. I feel like i have moved to a developing country not a developed country. The country seems more worried about this fake princess wedding and dumping more money into it than imaginable, then attacking an embarrassing problem of not providing housing for their citizens. A lot of jobs out there to be made for a lot of people who need places to live!
23:36 May 9, 2010 by tenorlove
You might have to scale down your wish-list and make some sacrifices, but try to pay cash if possible. We gave up smoking 16 years ago and put the money we would have spent on cigarettes into a jar, and a year later, had enough for a decent down payment. We made the realtor mad, buying a cheaper house than we could afford at the time. It meant I could stay home with my kids when they were little. We have since sold that house and purchased another. We paid cash for the house we live in now. In these times, not having a mortgage (or other debt) is really a plus, because one never knows. My husband had a heart attack last week, and cannot go back to work until September. If we had a mortgage, we'd be in big trouble. Since we live below our means anyway, we can make it on just my income for a while. It's hard to resist temptation in this world of instant gratification, but sometimes you have to do what's right, rather than what feels good.
21:55 July 27, 2010 by chrisco
Should be 20% down payment requirement for primary residence and 30% or more for any additional homes, such as second homes and/or investment properties. Full doc loans. Tight underwriting standards.
Today's headlines
Sweden to keep record-low interest rate in 2017
Sweden's landmark negative interest rate will continue towards 2018. Photo: Anders Wiklund/TT

The Swedish central bank said that it will take longer than expected to reach its inflation target.

Presented by Stockholm University
9 unexpected study programmes at Stockholm University
Photo: Niklas Björling

Did you know Stockholm University offers 75 master's programmes taught in English? And some of them are programmes you won't find anywhere else...

Creepy clown messes with the wrong dog walker in Sweden
Not the clown in the story. Photo: Pontus Lundahl/TT

A dog helped its owner fight off a creepy clown chasing the pair in southern Sweden.

A million Swedes are digitally excluded: report
How should Sweden bridge the digital divide? Photo: Henrik Montgomery/TT

Tech-savvy Swedes? Perhaps not. A new study suggests that at least a million of its residents feel the pain of the digital divide.

Malmö's 19th Swedish title sets Champions hopes alight
Malmö fans celebrating after the match. Photo: Björn Lindgren/TT

Malmö FF have their eyes set on the Champions League after winning the Swedish league for the 19th time.

What's on in Sweden
Five great autumn events in Sweden this week
Jazz in northern Sweden. Photo: Umeå Jazz Festival

Food, music, movies and more food. What better way of helping yourself forget that the days are getting shorter and colder?

Here's how slow Sweden's high-speed trains are getting
A Swedish SJX2000 high speed train. Photo: Tomas Oneborg/SvD/TT

The high-speed rail journey between the three biggest Swedish cities is about to get longer.

The Local List
12 Swedish words with just awesome literal translations
A filthy-minded lobster, i.e. a snuskhummer. Photo: Gorm Kallestad/NTB scanpix/TT

One of our favourite things about the Swedish language is its wonderful compound words, which range from being utterly bizarre to making perfect sense.

US election
Donald Trump won't get new Ericsson head's vote
Trump pictured at a campaign rally in Florida. Photo: Evan Vucci/AP

The new Swedish-American boss of telecoms giant Ericsson has revealed he will not vote for the Republican nominee in the forthcoming US presidential election.

Swedes named fourth most gender equal in the world
A file photo of men and women pushing prams in Stockholm. Photo: Claudio Bresciani/TT

Sweden has closed 81 percent of its overall gender gap according to the World Economic Forum.

Sponsored Article
One expat's strategy for making friends in Stockholm
People-watching: October 26th
Sponsored Article
Nordic fashion in focus at Stockholm University
Sweden cuts 2016 refugee forecast
Is Game of Thrones coming to Sweden?
Blog updates

6 October

10 useful hjälpverb (The Swedish Teacher) »

"Hej! I think the so-called “hjalpverb” (auxiliary verbs in English) are a good way to get…" READ »


8 July

Editor’s blog, July 8th (The Local Sweden) »

"Hej readers, It has, as always, been a bizarre, serious and hilarious week in Sweden. You…" READ »

Sponsored Article
Stockholm: creating solutions to global challenges
Property of the week: Kungsholmen, Stockholm
Sponsored Article
Last chance to vote absentee in the US elections
Will Swedes soon be looking for fairtrade porn?
The Local Voices
'I simply don’t believe in nationality'
Why we're convinced Game of Thrones is based on Sweden
Sponsored Article
This is Malmö: Football capital of Sweden
People-watching: October 21st-23rd
Sponsored Article
Where is the Swedish music industry heading?
Fury at plans that 'threaten the IB's survival' in Sweden
Analysis & Opinion
Are we just going to let half the country die?
Sponsored Article
Why you should 'grab a chair' on Stockholm's tech scene
Angry elk chases Swede up a lamp post
Sponsored Article
Swedish for programmers: 'It changed my life'
The Local Voices
'Alienation in Sweden feels better: I find myself a stranger among scores of aliens'
People-watching: October 20th
Sponsored Article
Top 7 tips to help you learn Swedish
The Local Voices
A layover at Qatar airport brought this Swedish-Kenyan couple together - now they're heading for marriage
Sponsored Article
‘Extremism can't be defeated on the battlefield alone’
Swede punches clown that scared his grandmother
Sponsored Article
Stockholm: creating solutions to global challenges
Fans throw flares and enter pitch in Swedish football riot
Sponsored Article
Why you should 'grab a chair' on Stockholm's tech scene
Could Swedish blood test solve 'Making a Murderer'?
Sponsored Article
Where is the Swedish music industry heading?
Swedish school to build gender neutral changing room
Sponsored Article
One expat's strategy for making friends in Stockholm
People-watching: October 14th-16th
Sponsored Article
Nordic fashion in focus at Stockholm University
Man in Sweden assaulted by clowns with broken bottle
Nobel Prize 2016: Literature
Watch the man who discovered Bob Dylan react to his Nobel Prize win
Record numbers emigrating from Sweden
People-watching: October 12th
The Local Voices
'Swedish startups should embrace newcomers' talents - there's nothing to fear'
How far right are the Sweden Democrats?
The Local Voices
Syria's White Helmets: The Nobel Peace Prize would have meant a lot, but pulling a child from rubble is the greatest reward
jobs available