• Sweden's news in English

Sweden's mortgage cap keeps out new buyers

TT/The Local/vt · 28 Jan 2011, 13:27

Published: 28 Jan 2011 13:27 GMT+01:00

Facebook Twitter Google+ reddit

Sixty percent of real estate agents contacted for a study conducted by the Association of Swedish Real Estate Agents (Mäklarsamfundet) believe Sweden's new mortgage cap">mortgage cap, introduced on October 1st, 2010, is effective.

However, the organisation has expressed concern over the substantial drop in home purchases by disadvantaged groups, especially first-time buyers. Association President Jeanette Gustafsdotter called it a "class issue" when rich parents pitch in to help out with home purchases.

Current rules limit new mortgages to a maximum of 85 percent of the home's market value.

The study conducted by the organisation shows that the most common way of financing the remaining 15 percent is through loans from parents, who in turn mortgage their own homes.

Over 1,000 brokers responded to questions about the new mortgage rules in the study.

At the same time, economically disadvantaged groups have disappeared from the market, primarily first-time buyers, according to the organisation. An increasing number of loan applications are denied, while it now takes a longer time to sell a home.

Those who already own a homes have an even bigger head start on the housing market, according to the organisation.

"We have already warned about this development in our comments on the proposal to introduce the mortgage cap when it was circulated for consideration. The most important thing for a healthy housing market is flexibility. Now children are forced to keep living at home," said Gustafsdotter.

"There is also a class issue. Not everyone has parents or relatives who can afford to lend them the other 15 percent," she added.

Gustafsdotter feels that the government should instead impose stricter requirements on banks and their mortgage calculations.

Swedish bank SEB's private economist Gunilla Nyström was a little surprised by the association's report.

"There has been much talk about alternative borrowing opportunities, such as through more expensive unsecured loans. However, households are not stupid and do not treat their homes like a bank machine for sundry consumption," she said.

"When one sees that there is a risk for repayment requirements and worsening tax deductions and interest rates going up, it results in a dampening effect on lending," added Nyström.

For now, the only option for young people in Sweden who do not have parents who can help them out with loans is to save, especially before they have a family of their own or development expensive habits, she said.

"When one goes from getting by on student loans of 8,000 kronor ($1,240) a month to a job that may pay 15,000 to 16,000 kronor a month, one can try to save a few thousand kronor a month. Within that, there is still room for more entertainment and clothing than during one's studies," said Nyström.

Story continues below…

According to Statistics Sweden, the annual growth rate for home loans was 8.5 percent in December 2010, the lowest since it began keeping comparable data in December 2002.

"The mortgage cap has definitely contributed to this," said Gustafsdotter.

While Housing Minister Stefan Attefall was sympathetic to the difficulties facing young home buyers, he argued the mortgage cap was having the desired effect.

"One has to be clear that it's sound to not let indebtedness rise at the pace it has been. It's not sustainable in the long term. No person should put themselves into a debt situation they can't manage," he told the TT news agency.

He suggested that young would-be home buyers should be "encouraged to save" in order to afford buying a home.

TT/The Local/vt (news@thelocal.se)

Facebook Twitter Google+ reddit

Your comments about this article

14:59 January 28, 2011 by karex
Agree. Mortgage caps have been used in other countries before and the result is always the same: owning a home becomes a "rich man's luxury" and beyond the reach of the average person. Stricter control of how banks calculate payback capability based on prospective owner's incomes are a much better way to handle this. If the banks had been more careful about calculating the payback capability and refused loans to those who couldn't possibly pay them back it would have avoided the real estate crunch which precipitated the global economic crisis. But they were just interested in sell-sell-sell...
15:17 January 28, 2011 by Maler1971
Lesser [new] home purchases result in lesser purchases of home goods/wares, furntire, etc etc. People tend to spend less on apartment rentals, knowing it's not "theirs" .

Less spending for consumers, less in the pocket of corp. less jobs for swedes. Its a very delicate cycle.
15:31 January 28, 2011 by Mib
Banks have proven that they cannot keep control due to greed. That is why the 85% rule has come in to PROTECT the whole of the economy for the betterment of ALL!

As a first time buyer, it will be more diffcult...but before the credit frenzy days, people like me and millions of others used to save a deposit via overtime, hard work and living as cheaply as possible for 2 years or more. It was blÖÖdy difficult, but that is what normal people used to do. Now, they expect everything to be handed to them on a plate without working hard or making sacrifices to do it. Some people will lose any possibility to ever own their own home, but it's not a right! It was before and looked what happened worldwide....it created one of the biggest credit crisises ever, which still continues today. The SOLUTION is simple, BUILD MORE PROPERTIES, so demand is met, which forces prices down to affordable levels!

It's like car fuel and taxes....they are used to bring in more tax, curtail people's wastage of fuel for the environment. But what it also does is price some people out of owning a car or using it to drive other than for work. Again...no-one has thr ight to own a car and drive it whenever and wherever without affording the costs. If they need a car, then they have to save and get rid of the holiday for a few years or STUDY for higher qualifications to raise their earning power. Simple!

Of course, there will always be a section of society that needs extra support to help them achieve their goals and dreams, but that should be targetted and not available to everyone.
16:05 January 28, 2011 by Mb 65
I can tell you it was harder in the 70's to get a mortgage. They lent 1½ times your income and did not take the wife's income into account. interest was higher as well. Some comments state that banks won't lend to the poor and next that the banks were wrong to lend to people that couldn't pay it back.
17:57 January 28, 2011 by InterestedObserver
Please correct me if I am wrong --- I understand part of the problem is the tax deductability of mortgage interest payments (as in the Netherlands). Is there any talk of getting rid of this tax break? Presumably doing so would reduce the attractiveness of owning vs. renting and have some impact on (relative) prices of mortgages vs. rents.
19:07 January 28, 2011 by bjorkon
"Jeanette Gustafsdotter called it a "class issue" when rich parents pitch in to help out with home purchases." .. hilarious. Why would an association of estate agents say anything else? They need houses to change hands to survive.

They will talk of the exploitation of the the same group when the "economically disadvantaged" are plunged into the trap of negative equity as the cycle turns and the downturn in house prices arrives.
09:56 January 29, 2011 by Baned
I agree with Mib! Although we bought our first home before they imposed the cap, we scrimped and saved to be able to put down a 20% deposit. Homeownership is hard business and there are tons of unexpected expenses during our first year (random things turned out needing to be repaired and replaced).

I don't think it should be a hard-pressed issue to have to save money to be able to buy a home. If you can't manage to save enough, then perhaps you should look for a home you can more easily afford. It's not rocket science!
12:54 January 29, 2011 by Streja
The problem is that there aren't enough rentals in Stockholm and Göteborg...so people had to buy instead of renting. We're not talking about people who are 19 but people who are 26 and older who can't find a rental because there are none.

I bought a flat when I was 27. Luckily I got a mortgage. My financial situation has only improved since then as I sold it with a profit years later.
13:41 January 29, 2011 by McChatter

As far as I know there is no talk of getting rid of this tax deduction. If there was, it would certainly bring the prices down, since it would be even harder for all people to afford buying a house. In the Netherlands, it is talked about from time to time and it always has a negative effect on house prices.

A far worse "hidden" problem in Sweden is "uppskov", the deferment of paying tax on the realised profit when one sells a house. There are literally billions of crowns of unpaid taxes. If the State were suddenly to demand payment of these amounts then Sweden would get into serious economic difficulties. In the present situation - as far as I know - Skatteverket simply says: ' you bought the house for such and such an amount and sold the house for such and such an amount. We want 30% of the difference.' They do not take inflation into account. So, if you paid let's say SEK 100,000 for your house in 1970 and want to sell it now for 2.500,000 then you owe the State SEK 720,000! Fortunately you don't have to pay it immediately; you can defer the payment. This problem has also helped to "freeze" the housing market. So people tend to sit where they are and wait and hope that some government will have enough guts and sense to alter this ridiculous tax.

I hope this gives you a better picture of the situation in Sweden
17:20 January 29, 2011 by Gordy
What has really inflated prices is the crazy situation regarding the bottom loan (the interest only portion of the mortgage).

If this situation is addressed as the banks are seeking in the article below then we will really see an impact on house buying and not just for first time buyers,

10:52 January 30, 2011 by calebian22
Saving money for something you want? How unreasonable!
01:44 January 31, 2011 by planet.sweden
Any responsible house buyer would want to put down at least 15 percent as a deposit. I don't believe this law will block first time buyers, although it may make them think twice about what they can, and can not afford, and which areas.

As for the rich, they will always be with us.
11:02 January 31, 2011 by Kiwiman
So the question is.


I have a really confortable income ( +- 40,000 SEK tax paid).

But I have no economies on the side. Not a single SEK.

How can I buy a flat or a house?

I can pay the mortrage without problem but dont have the 15%.

I would like a 4,000,000 SEK house, where do i find the 600,000 starting one?
15:31 January 31, 2011 by hjoian
@kiwiman......ever heard of saving? Ok,so you wont get your house straight away,i think this is half the problem with the new generation of house buyers,in that they have never had to save for anything,and bought everything on credit before. I worked hard and paid cash for my home, and yet my Swedish neighbours thought i was bonkers to spend my own cash when i could have borrowed it from the bank. Its all a difference of opinions,i personally dont think finding 15% is too much to ask for.....you have to buy within your own budget,not just what the bank is willing to throw at you.
Today's headlines
Dylan removes Nobel-mention from website
The American musician has more or less responded to the news with silence. Photo: Per Wahlberg

American singer-song writer Bob Dylan has removed any mention of him being named one of this year’s Nobel Prize laureates on his official website.

Refugee crisis
Asylum requests in Sweden down by 70 percent
Sweden's migration minister Morgan Johansson. Photo: Christine Olsson/TT

Sweden received 70 percent fewer requests for asylum in the period between January and September 2016 than it did during the same time last year, the country’s justice and migration minister Morgan Johansson has revealed.

The unique story of Stockholm's floating libraries
The Stockholm archipelago book boat. Photo: Roger Hill.

Writer Roger Hill details his journeys on the boats that carry books over Stockholm's waterways and to its most remote places.

Refugee crisis
Second Stockholm asylum centre fire in a week
The new incident follows a similar fire in Fagersjö last week (pictured). Photo: Johan Nilsson/TT

Police suspect arson in the blaze, as well as a similar incident which occurred last Sunday.

More misery for Ericsson as losses pile up
Ericsson interim CEO Jan Frykhammar presenting its third quarter results. Photo: Claudio Bresciani/TT

The bad news just keeps coming from the Swedish telecoms giant.

Facebook 'sorry' for removing Swedish cancer video
A computer displaying Facebook's landing page. Photo: Christine Olsson/TT

The social media giant had censored a video explaining how women should check for suspicious lumps in their breasts.

Watch this amazing footage of Sweden’s landscapes
A still from the aerial footage of Sweden. Photo: Nate Summer-Cook

The spectacular drone footage captures both Sweden's south and the opposite extreme, thousands of kilometres north.

Sweden could be allowed to keep border controls: EU
Police ID checks at Hyllie station in southern Sweden. Photo: Stig-Åke Jönsson/TT

Sweden could be allowed to keep ID controls on its border with Denmark beyond the current end date of November, following discussions among EU leaders in Brussels last night.

Why women in Sweden will work for free by November
File photo of a woman working in a Swedish office. Photo: Anders Willund/TT

A new study into the gender pay gap suggests Sweden still has some work to do.

Look familiar? Meet your jawbone's ancestor
Thank God for evolution, eh?

There's something fishy about the human jawbone – it has its origins in the placodermi, a jowly species of fish that lived 400 million years ago, Swedish and Chinese researchers say.

Sponsored Article
This is Malmö: Football capital of Sweden
Fury at plans that 'threaten the IB's survival' in Sweden
Sponsored Article
Where is the Swedish music industry heading?
Here's where it could snow in central Sweden this weekend
Analysis & Opinion
Are we just going to let half the country die?
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
7 reasons you should join Sweden's 'a-kassa'
Angry elk chases Swede up a lamp post
Sponsored Article
Why you should 'grab a chair' on Stockholm's tech scene
The Local Voices
'Alienation in Sweden feels better: I find myself a stranger among scores of aliens'
People-watching: October 20th
The Local Voices
A layover at Qatar airport brought this Swedish-Kenyan couple together - now they're heading for marriage
Sponsored Article
Stockholm: creating solutions to global challenges
Swede punches clown that scared his grandmother
Sponsored Article
Swedish for programmers: 'It changed my life'
Fans throw flares and enter pitch in Swedish football riot
Could Swedish blood test solve 'Making a Murderer'?
Sponsored Article
Top 7 tips to help you learn Swedish
Property of the week: Linnéstaden, Gothenburg
Sponsored Article
How to vote absentee from abroad in the US elections
Swedish school to build gender neutral changing room
People-watching: October 14th-16th
Sponsored Article
'There was no future for me in Turkey'
Man in Sweden assaulted by clowns with broken bottle
Sponsored Article
‘Extremism can't be defeated on the battlefield alone’
Nobel Prize 2016: Literature
Sponsored Article
Stockholm: creating solutions to global challenges
Watch the man who discovered Bob Dylan react to his Nobel Prize win
Sponsored Article
Why you should 'grab a chair' on Stockholm's tech scene
Record numbers emigrating from Sweden
Sponsored Article
'There was no future for me in Turkey'
People-watching: October 12th
Sponsored Article
Where is the Swedish music industry heading?
The Local Voices
'Swedish startups should embrace newcomers' talents - there's nothing to fear'
Sponsored Article
Last chance to vote absentee in the US elections
How far right are the Sweden Democrats?
Property of the week: Triangeln, Malmö
Sweden unveils Europe's first elk hut
People-watching: October 7th-9th
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
Missing rune stone turns up in Sweden
Nobel Prize 2016: Chemistry
jobs available