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Swedish regulator wants stricter mortgage amortization rules

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Swedish regulator wants stricter mortgage amortization rules

Sweden's financial supervisory authority plans to introduce a stricter amortization requirement for certain new mortgage holders, noting that the high level of household debt and rising house prices are causing vulnerabilities to build up in the economy.

Under Finansinspektionen's plan, all new mortgage holders who borrow more than 4.5x their pretax income must amortize one percentage point more of their mortgage per year than what they would need to at present. As a result of the proposal, the most vulnerable households, or those with a high level of debt in relation to both their income and the value of their homes, will amortize at least 3% of their mortgage a year.

"The proposal will be submitted for consultation in the near future," Finansinspektionen Director General Erik Thedéen said.

The regulator cited the "unique combination" of a strong economy and record-low interest rates as factors leading to rapid growth of household debt and house prices, with the latter increasing more than 40% in the past three years.