The Local is not responsible for content posted by users.
2 Pages V  < 1 2   Reply to this topic

Swedish Households at Risk of Increase in Rates:

350$/month payment increase will sink many

john.boy
post 29.Nov.2017, 07:43 PM
Post #16
Location: Stockholm county
Joined: 27.Sep.2017

QUOTE (oddsock @ 23.Nov.2017, 05:00 PM) *
No, that's not how money works. Debt is not a bank loaning out people's savings. The average Swedish mortgage is what? One million, two million SEK? Is the average Swe ... (show full quote)

Banks create debt, but to do so they can only leverage so much. For example, let's say the bank is allowed to leverage 1M cash it has 10x, then it must retain 1M whilst creating debt of 10M. If it does not have the 1M then it can borrow that. There are 2 simple ways to achieve that borrowing, they borrow from other banks (costs a little), or they borrow from customers (much cheaper).

Remember, when you deposite money into your bank account it is no longer your money, you have technically lent it to the bank. So, if account holders are saving more than ever, it is cheaper for the bank to cover their capital requirements by borrowing from their customers accounts (the money you lent to them) than borrowing from other banks.

In the 1990 crash one of the issues was that deregulation had occurred in the 80's, banks were allowed to borrow internationally, savings were not at the level they are today so banks borrowed heavily from foreign institutions in currency.

QUOTE (wondering_again @ 27.Nov.2017, 10:38 PM) *
In 2012 the interest was 4.4% and no amortering or just minimal. Now people pay between 1.7 - 1.9 % and a amortering of 2-3% a year.

There is a back game here being played- Playing upon the notion that every loan is a 100% mortgage, and as some write here for mortgages with a 100 year term!!! biggrin.gif

The reality is, the average mortgage in Sweden is at 60% of the value of the property, and the average life of a mortgage is actually, get ready for this, 7 years! YES, that is data from the banks. The average mortgage is only 7 years in duration, remember that when the property is sold the entire mortgage is repaid. and if the seller is purchasing a new property then that is financed by a new mortgage negotiated at that days terms and conditions.

In the 1990 crash, I said it before and will say it again, 40% of bank losses were due to Commercial Property. Losses from home mortgages were down in the single digit percent range.

As for interest rates at 4% biggrin.gif Even the banks 10yr rate you can get right now will only barely touch that level. That is what they think will happen with rates in the short to longer term. If the rates rise it is more likely that it is because the economy is doing well, in which case most people with a mortgage will also be doing well and incomes will have risen in line. You cannot assume a static salary but a rapid rise in interest rates!
Go to the top of the page
+
wondering_again
post 29.Nov.2017, 09:46 PM
Post #17
Joined: 12.Feb.2014

New tax coming in

http://cornucopia.cornubot.se/2017/11/soci...aterinfora.html
Go to the top of the page
+
Gjeebes
post 30.Nov.2017, 05:41 AM
Post #18
Joined: 20.Feb.2012

How will people's savings be caught up in this new money grab? An odd move from the most odd country.

Looks like January can't arrive fast enough!
Go to the top of the page
+
TLSucks
post 30.Nov.2017, 01:00 PM
Post #19
Joined: 12.Dec.2013

QUOTE (Gjeebes @ 30.Nov.2017, 05:41 AM) *
How will people's savings be caught up in this new money grab? An odd move from the most odd country.. Looks like January can't arrive fast enough!


It basically says that you need to pay capital gains tax on unrealized gains when you move assets abroad. This is called exit tax in most countries. As it is now, you can entirely avoid capital gains tax if you realize your gains first after moving abroad.
Go to the top of the page
+
Gjeebes
post 8.Dec.2017, 10:43 AM
Post #20
Joined: 20.Feb.2012

QUOTE (Gjeebes @ 28.Nov.2017, 03:44 PM) *
"...Start buying shorts in the Swedish mortgage sector!!!!

Haha! Looks like Soros was listening!

He just shorted all his shares in the Swedish economy.

https://mobile.twitter.com/PeterSweden7/sta...34200266753?p=v

Mmmm, Meatballia never looked so good!
Go to the top of the page
+
Gjeebes
post 22.Dec.2017, 07:43 AM
Post #21
Joined: 20.Feb.2012

And Sweden finds itself tightly painted into the corner again, where it seems to be most comfortable.

https://seekingalpha.com/article/4133251-lo...ish-magic-trick

"A housing bubble that was supercharged by excessively loose monetary policy is now bursting and while that naturally should mean that the central bank will be cautious to pull back on stimulus, in this case it actually gave the Riksbank a little wiggle room on the hawkish side because it pushed the currency lower and the reason they're having trouble exiting accommodation in the first place is because they're worried about currency strength because the ECB is still easing.

And yes, that is just as absurd as it sounds.

See this is what I mean when I tell you that the post-crisis environment has become so laughably convoluted that it's difficult to imagine how everyone is going to be able to reverse course on these policies without something going horribly awry."

Tick-tock tick-tock...
Go to the top of the page
+
Gjeebes
post 21.Jan.2018, 09:41 AM
Post #22
Joined: 20.Feb.2012

It's still anyone's guess, but it IS interesting that the most exposed Swedish bank, Swedbank, of the 7 asked in the article linked below, seems to have the rosiest outlook (yet with 60% of its lending, in properties). Are they simply bluffing to retain (a shrinking) consumer confidence (as banks and consumers tend to do in times of trouble)...?

https://nordic.businessinsider.com/heres-wh...7-major-banks--

All things considered, it seems (historically) logical that things will get worse, before they get better.

It will also be interesting to see, should things go belly-up here, how Nordea's HQ move to Finland, will serve to save it from exposed Sweden, as Finland's economy picks up (and the write-offs will likely be gifted instead, to Sweden).

And then if a 10% value loss in property/housing value results (historically) in a 30-40% drop in Swedish consumer spending...what will the predicted 25% loss in property value (see Nykredit and Dabish bank comments in the link above) bring forth in terms of lost consumer spending? Is the function linear, or exponential?

And what is the fate of the supposed "record Swedish household savings"? Isn't that in itself a bubble, that will simply disappear, once the prime rate increases (which, let's face it, it simply MUST do, within the next 2 years)?

Sweden's 2018 will be an interesting year, most certainly.
Go to the top of the page
+
Gjeebes
post 21.Jan.2018, 10:06 AM
Post #23
Joined: 20.Feb.2012

Just saw this as well: "Nordea Bank Continues to Lose Market Share in Swedish Mortgages"

https://www.bloomberg.com/news/articles/201...edish-mortgages

I wonder, considering the uncertainty in Sweden, if this is somehow good news for them?

Just an amicable parting of ways, followed by high-5s all around in the upper chambers of Nordea?
Go to the top of the page
+
Gjeebes
post 21.Jan.2018, 03:48 PM
Post #24
Joined: 20.Feb.2012

Also, something general to consider.

"...how does one spot a bubble?"

1) A bubble is "the situation created when prices go super-exponential" and causes a "departure from fundamentals"

2) Another characteristic is that it's driven by "pure speculation" as "traders are buying and selling without even considering the fundamental value of the asset".

http://www.abc.net.au/news/2018-01-19/bitc...-shares/9343422

3) "From a macroeconomic perspective, property bubbles tend to be the most dangerous because they affect such wide portions of the population,"

4) "What's behind the rampant rise in property prices is "accommodative monetary policy and excess liquidity...?" --> "In other words, too much money being lent very low interest rates which makes it all too easy for people to borrow above their means."
Go to the top of the page
+
john.boy
post 23.Jan.2018, 08:27 PM
Post #25
Location: Stockholm county
Joined: 27.Sep.2017

QUOTE (Gjeebes @ 21.Jan.2018, 10:06 AM) *
I wonder, considering the uncertainty in Sweden, if this is somehow good news for them?

What the Government neglected to mention is that when Nordea leave Sweden they take with them 40% of all Sweden's banking assets. That alone is not good news for Sweden.
Go to the top of the page
+
Gjeebes
post 24.Jan.2018, 07:34 AM
Post #26
Joined: 20.Feb.2012

QUOTE (john.boy @ 23.Jan.2018, 08:27 PM) *
What the Government neglected to mention is that when Nordea leave Sweden they take with them 40% of all Sweden's banking assets. That alone is not good news for Sweden.

Nice! And considering Sweden's backwards thinking and pure greed caused them to leave, it really seems like the Swedes know how to make a plan come together.
Go to the top of the page
+
Gjeebes
post 24.Jan.2018, 04:38 PM
Post #27
Joined: 20.Feb.2012

Also worth noting, and which has really not been exposed, is the "soft landing" argument based on "Swedes' record high savings".

Ok, so, when I moved to Sweden in 2011, it was reported that Swedes had the lowest savings, in the entire EU.

Then I started hearing, by say, 2015, 2016, that Swedes had huge savings.

Hmm, I wondered, what has happened here?

The answer? Cheap loans. Instead of spending "the savings", which Swedes prior to overloading themselves in debt, had none of, they instead save "money", somewhere, as permitted by acquiring "borrowed money" instead.

So, why isn't anyone seeing that when things go tits up, those "savings", vanish. Yes, it is a savings bubble!

WTF does it matter, if you have 2 million sek, in your savings account, when you owe the bank, 5 million sek?

It simply means you are 3 million sek, in debt...and that does not commute to "savings", now, does it?
Go to the top of the page
+
john.boy
post 25.Jan.2018, 07:55 PM
Post #28
Location: Stockholm county
Joined: 27.Sep.2017

QUOTE (Gjeebes @ 24.Jan.2018, 04:38 PM) *
WTF does it matter, if you have 2 million sek, in your savings account, when you owe the bank, 5 million sek?It simply means you are 3 million sek, in debt...and that does not ... (show full quote)

You have purposely ignored the value of any asset the debt might be secured against.
I could have 2M in the bank, owe 5 million as mortgage, home market value of 7M = +4M.

Average mortgage in Sweden is below 70% of asset market value.
Go to the top of the page
+
Gjeebes
post 26.Jan.2018, 06:56 AM
Post #29
Joined: 20.Feb.2012

In that example, you would be 1 million in debt. Better than 3 million though.

"Average mortgage in Sweden is below 70% of asset market value."

Haha! Exactly. That's why it's called a "bubble". That "bonus" 30% can vanish.
Go to the top of the page
+
oddsock
post 28.Feb.2018, 06:13 PM
Post #30
Joined: 19.Dec.2008

EUR/SEK 10.10.

Highest since financial crisis.

Things are going south at quite a pace.
Go to the top of the page
+

2 Pages V  < 1 2
Reply to this topic
1 User(s) are reading this topic (1 Guests and 0 Anonymous Users)
0 Members: