Ingves: The housing market and household indebtedness from a central bank perspective
"There are several possible measures which could contribute to dampening household indebtedness and reducing risks linked to developments on the housing market. The Riksbank analyses these developments because they have an impact on our ability to perform our task."
These are the words of the Governor of the Riksbank Stefan Ingves on Thursday as he takes part in SNS's conference on the rapid increase in house prices and household indebtedness - and on what can be done to slow the developments down.
Developments are moving in the wrong direction
Mr Ingves notes that there are threats to the real economy, financial stability and price stability which are linked to the housing market and household debt.
"The low interest rate is currently supporting the upturn in inflation and maintaining confidence in the inflation target. Inflation is now moving in the right direction. A precondition for the success of the monetary policy strategy in the long term is that measures are taken elsewhere to combat indebtedness," Mr Ingves points out.
He states that authorities have a responsibility to act when developments threaten macroeconomic and financial stability. Sweden is somewhat behind in this regard according to Mr Ingves.
Different ways to dampen household demand for mortgages
There are several possible measures which could reduce the risks and dampen overall indebtedness in the economy as well as prevent groups of households getting too deeply into debt. These could include changes to tax relief and loan-limiting measures such as a debt-to-income limit, for example. However, Mr Ingves emphasises that a precondition for being in a position to introduce loan-limiting measures is the clarification of the mandate for macroprudential policy.
"The measures are needed to improve risk management. Measures taken today reduce the risk of unfavourable developments further ahead. This is something which not only benefits the Riksbank, but also Swedish society as a whole," Mr Ingves stresses.
Read the whole speech via the adjacent link.