Riksbank calls for task force on household debt
The Local · 3 Jan 2014, 09:46
Published: 03 Jan 2014 09:46 GMT+01:00
- Riksbank slashes repo rate to 0.75 percent (17 Dec 13)
- Deflation 'surprise' hits Swedish economy (12 Nov 13)
- Ex-Riksbank official bashes rate policies (04 Jun 13)
Stefan Ingves told the Dagens Nyheter newspaper on Friday that Swedish households should not be allowed to surpass 180 percent indebtedness.
"If not, we get what I call a debt dominance, which means financial politics will have to focus completely on debt problems and won't be able to at the same time take on other important questions," Ingves said.
Debt levels have remained stagnant since 2010 - the same year that the Swedish Financial Supervisory Authority (Finansinspektionen - Fi) decided that new mortgages' loan-to-value ratio could not exceed 85 percent. Bloomberg Markets reported last year that one third of Swedish borrowers had gone beyond that ratio in buying homes before the cap came into effect.
But now, Ingves said on Friday, the indebtedness is creeping up again.
The Local reported in August that the European Commission was increasingly worried about high housing prices, but observers disagreed about whether it can be called a bubble or not.
“Our basic view is that there is no bubble,” Gregori Karamouzis, head of investor relations at Swedbank, Sweden’s largest mortgage lender, told Bloomberg Markets.
The main reason, as anyone attempting to find an apartment in Sweden may have guessed, is the discrepancy between the number of home hunters and the number of homes. Supply is short which acts to prop up the market.
In the end, Ingves noted in his interview with DN, it may not be Swedish observers who have the last say in the matter.
"We know that more than half of the banks' finances come from abroad and that means (foreign actors) can have opinions about our mortgage market," Ingves said. "In the end, it's the foreign investors' view of us that will be conclusive."
The Riksbank chief said it was time for the politicians to look at the question in the long-term. The central bank itself issues three-year predictions, which were not extensive enough to look at the problem in all its scope, Ingves underlined.
"In the end we need political decisions about the rules on the housing market," he said.
And do it fast and don't be scared of controversial solutions to the problem, was Ingves' ultimate message
"It's been going on for such a long time and by now we have an imbalance that is eating away at the housing market. The longer it goes one, the bigger the risk that it comes to dominate many other issues."