New Swedish approach to mortgage financing: 140 years to pay off the mortgages
Thursday, 07 March 2013
The discussions on bank lending practices, interest rates and the risks
of a possible housing bubble continues in Sweden as it emerge that the
approach to use about 140 years to pay off mortgage is an approach that
On Thursday the Swedish Financial Supervisory Authority (FI) presented
its annual mortgage survey. It shows that policies that limit how much
banks can lend in relation to the property value continue to work, and
that few households now have mortgages beyond 85 percent of the
According to Swedish daily, Dagens Nyeheter, households with large
mortgages have become better at paying off their loans, and nine out of
ten households with housing loans to value ratio (LTV) above 75 percent
pay now in instalments.
Many instalments give some amount of liberty but for those with LTV
below 75 percent, the trend is reversed. They repay their loans at
lower levels. Only four out of ten repay their loans at all. On
average, it takes the current repayment rate up till 140 years for
these households to get rid of their mortgage, a stress test shows
according Swedish business daily, Dagens Industri.
It follows that if house prices in Sweden would fall by 15 percent,
then approximately 11 percent of households will be left with a
mortgage that is higher than the property's value.
FI will on the basis of the results of mortgage survey together with
the Central Bank will analyze the long-term effects of the Swedish
household debt level.
by Scancomark.com Team
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