Economic Commentary: Financial risks in the household sector

One of the most important functions of the financial system is to enable households and companies to borrow money. But if households take on substantial debt, there is a risk of socio-economic problems in the event of future macroeconomic or financial shocks, if for example incomes decrease, interest rates increase or housing prices fall. The analysis in this Economic Commentary indicates that indebtedness in the Swedish household sector is currently at a level that can entail increased risks to the economy as a whole.

The authors of the commentary assess the risks linked to Swedish households' present level of indebtedness on the basis of two approaches:

  • The first is based on aggregate data and indicates that the current aggregate household loan-to-income ratio poses heightened risks to the Swedish economy.
  • The other approach applies experiences from countries affected by falls in house prices to Swedish household-level statistics to illustrate how much household consumption could decrease as a result of high indebtedness in the event of a future macroeconomic shock.

The results are uncertain and should be interpreted with caution. However, together with other indicators, they give clear signals that the risks in the Swedish economy have increased as a result of the high level of household indebtedness.

Prior to the publication of the Financial Stability Report on 3 June, 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. This is the first of these Economic Commentaries.

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

By Robert Emanuelsson, Ola Melander and Johan Molin. The authors work in the Financial Stability Department of the Riksbank.


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.

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