Finansinspektionen’s proposal for an amortisation requirement
The Riksbank welcomes Finansinspektionen's proposal regarding the amortisation of new mortgages. On several occasions, the Riksbank has stressed the importance of introducing an amortisation requirement to reduce the risks associated with high household indebtedness.
The Riksbank is of the opinion that:
The proposed amortisation requirement is relatively mild from an international perspective. One reason is the possibility to revalue a home every fifth year based on a general price trend on the housing market. The requirement should therefore be supplemented with an income-based debt limitation.
The proposal to enable a home to be revalued in the event of a substantial change in value should be clarified.
The banks' scope for granting exemptions on special grounds should be limited, temporary and reviewed on a regular basis in order to create a more effective amortisation requirement. It should be up to the lender to grant exemptions from the amortisation requirement and not be a borrower's automatic right.
The Riksbank stands by its criticism of the proposal to exempt newly built homes from the amortisation requirement. If such an exemption is nevertheless introduced, it should be time-limited.
The Riksbank also reiterates its criticism of the fact that Finansinspektionen is to obtain the consent of the Government prior to the proposed amortisation requirement being adopted.
Finansinspektionen should continuously evaluate whether the amortisation requirement has had the desired effect on rising debt levels.
Even if the Riksbank thinks that the proposed amortisation requirement is a step in the right direction, further measures are required to manage the high level of indebtedness among households.
"It is of considerable importance that the measures are introduced quickly to reduce the risks associated with household indebtedness. Finansinspektionen's proposal for an amortisation requirement is a step along the way, but will have little effect on overall indebtedness in Sweden and is therefore not sufficient to reduce the risks", says the Governor of the Riksbank, Stefan Ingves.
Read the whole consultation response here:
Consultation response to "Proposal for new regulations stipulating an amortisation requirement for new mortgages"