Two Economic Commentaries: Analyses of interest-rate fixation periods and debt-to-income limits

High percentage of mortgages at variable interest rates increases risk

It has become increasingly common for Swedish households to choose variable interest rates over fixed interest rates on their mortgages. In this choice, households appear to take into account both the interest rate differential and future interest rates. In the Economic Commentary "An analysis of the fixation period for Swedish mortgages", the authors study both households' choices of fixation periods and the risks these choices may entail, and the banks' funding of mortgages. The analysis shows that the high percentage of mortgages at variable interest rates could entail a risk in the event of an unexpected rise in interest rates.

Debt-to-income limit as complement to loan-to-value limit

In the second Economic Commentary, "An analysis of the debt-to-income limit as a policy measure", the authors discuss the advantages and disadvantages of limiting households' scope to borrow in relation to their disposable incomes, as a means of reducing the risks linked to rising housing prices and increasing indebtedness. Among other things the authors show how different debt-to-income limits may affect different income and age groups, as well as regions and banks. If it is calibrated well, the authors consider that a debt-to-income limit may constitute a good complement to the loan-to-value limit.

Prior to the publication of the Financial Stability Report on 3 June, the analyses used as a basis for the report will be published as Economic Commentaries. In line with the main theme of the report, the commentaries contain an analysis of the financial risks in the household sector, possible measures to manage these risks and the macroeconomic effects of these possible measures. These are the second and third of these Economic Commentaries.

Read the entire Commentaries here: "An analysis of the fixation period for Swedish mortgages", "An analysis of the debt-to-income limit as a policy measure"

Read the first commentary here: "Financial risks in the household sector"

Analysis of interest-rate fixation period by Hannes Janzén, Peter van Santen, Erik Spector (who work in the Financial Stability Department), Ulf Holmberg and Louise Oscarius (who were also working in the Financial Stability Department at the time of writing this Commentary but are now working at Swedbank and the Bank of England respectively).

Analysis of the debt-to-income limit by Gustav Alfelt, Dilan Ölcer (who work in the Financial Stability Department) and Björn Lagerwall (who works in the Monetary Policy Department).

The opinions expressed in the economic commentaries represent the authors' personal opinions and cannot be regarded as an expression of the Riksbank's view on the questions concerned.