Swedes domestic debts Mountain continues to grow and even faster
Tuesday, 27 August 2013
Swedish households borrow more and at increase occurring and at a
very rapid pace, pushing the worrisome Swedish household debt mountain
higher.
According to figures from Statistics Sweden (SCB), 90 percent of the
increase borrowing in to finance house loans or mortgages driven by the
astronomical prices growth of Swedish houses.
In the press release from statistic Sweden, the Monetary Financial
Institutions’ (MFIs) loans to households increased at an annual rate of
4.8 percent in July. This represents an increase of the growth rate
compared to June when it was 4.7 percent. In July 2012 the growth rate
was 4.5 percent. MFIs include banks and real estate funding or housing
credit institutions among others.
MFI’s loans to households in July amounted to SEK 2 841 billion. This
is an increase of SEK 127 billion compared to the corresponding month
last year. Most of the increase can be explained by housing loans,
which accounted for SEK 111 billion of the increase and had an annual
growth rate of 5.1 percent in July.
Housing loans are loans to households with single-family dwellings,
condominiums and tenant-owned apartments as collateral. Outstanding
housing loans to households at MFIs amounted to SEK 2 288 billion in
July. The remainder of household lending consists of, among other
things, loans for consumption, which often lack collateral, and other
loans where, for example, agricultural buildings comprise the
collateral. In July, household loans for consumption amounted to SEK
171 billion and had an annual growth rate of 4.4 percent.
Lending by MFIs to non-financial corporations amounted to SEK 1 874
billion and grew at an annual rate of 1.4 percent. This represents an
increase in the growth rate compared to June when it was 1.3 percent.
In July 2012 the growth rate was 2.7 percent. Most of the loans to
non-financial corporations comprised loans with multi-dwelling
buildings as collateral. In July, these loans amounted to SEK 577
billion. Loans to tenant-owner associations amounted to SEK 343 billion.
It is something that worries Robert Boije, chief economist at the Swedish FSA, Finansinspektionen.
“The risk is that if a recession hits with falling house prices some
household debt will get higher than house prices. The means that many
house come under negative equity and mean that households will reduce
their consumption, which may affect the macro economy negatively and
have repercussions within the financial system. Among other banks can
get credit squeeze,” he says.
“Household debt is at a historically high level. Exactly where the
limit can go is hard to say, but we are following developments closely
and are prepared to take action if it goes in the wrong direction,”
says Robert Boije
Many organisations such as the OECD, European Commission, the IMF and
credit rating establishments such as Standard and Poors among others
have warned Sweden of its ballooning household debts and its runaway
house price prices. May of these organisation say Swedish house prices
are artificial and are over-valued. It is also a reason why the Swedish
central bank has a very string migraine in designing interest rates
because unemployment is high while inflation is very low. The question
is how do you stimulate the economy in such a situation?
by Scancomark.com Team
