Ingves: The housing market, the banks and household debt
Governor Stefan Ingves took part on 1 March in the Riksdag Committee on Finance’s hearing on developments in the Swedish credit market and the measures at the disposal of the responsible authorities. In his main speech he described the Riksbank’s views on the housing market, the banks and the current level of household debt.
He points out that various agents have so far contributed in different ways to ensuring that developments in household debt and housing prices do not give cause for concern. The Riksbank as part of its monetary policy work has raised the repo rate a number of times, and more increases are forecast, which also affects the housing market. Finansinspektionen (the Swedish Financial Supervisory Authority) has issued a recommendation regarding a cap on the loan-to-value ratio. The Swedish Bankers’ Association has issued recommendations regarding requirements for amortisation on new mortgages.
However, it remains to be seen whether these measures and the increased general awareness will suffice to slow down developments and lead them onto a less risky track. There are strong reasons to remain vigilant.
Mr Ingves says that the continuing work on remedying problems and deficiencies in the Swedish mortgage market should be governed by three priorities: to gain a better overview of the mortgage market, to seriously discuss the level of risk weights for mortgages in Sweden, and to ensure that the authorities can actually use the tools they currently have at their disposal to cool down the mortgage market. In the slightly longer run there is also a need to examine and clarify the division of responsibility between the authorities so they can better manage the type of problem we are seeing today. Moreover, there is reason to consider measures that further strengthen the banking sector in general.
Read the entire speech in the PDF file below.
