A Swedish government commission has recommended loosening mortgage rules to improve housing access, especially for first-time buyers. Current rules, aimed at reducing financial risks, set borrowing limits and strict repayment terms, which critics say hinder new buyers. The commission proposed raising the borrowing cap to 90% of a property's value and easing repayment for large loans, while also adding a cap on loans relative to income. The government will consider these adjustments in the spring.
A government-appointed commission in Sweden recommended on Monday that the country should relax mortgage borrowing and repayment rules, which have been a barrier for new homebuyers. The commission's head, Peter England, stated that there is room to ease these measures without risking financial stability.
Financial Markets Minister Niklas Wykman stated that the government will decide in the spring how to adjust mortgage rules. Swedish households, with debt levels around 190% of disposable income, are among the most indebted in Europe. The current mortgage rules, introduced after the 2008-2009 financial crisis, aim to reduce risks to the banking system by setting a borrowing cap and repayment requirements for large loans. However, these rules have faced criticism for limiting access for first-time buyers and those without initial capital.
Highly indebted households were severely impacted by recent high inflation and interest rates, which further reduced consumer spending and affected the economy. The commission advised raising the borrowing cap from 85% to 90% of a property's value and relaxing repayment requirements for larger loans. However, it also recommended that the government add an income-based limit, capping mortgage loans at roughly 5.5 times a household's annual gross income.
Niklas Wykman is Sweden's Financial Markets Minister, responsible for overseeing the country's financial policies, including mortgage and housing finance regulations. In his role, Wykman has been closely involved in reviewing and potentially adjusting the strict mortgage rules initially implemented to curb household debt and safeguard financial stability. Given Sweden's high household debt levels and growing challenges for first-time homebuyers, Wykman announced that the government will decide in spring on possible adjustments, following the recent recommendations from the government-appointed commission.
Sweden's original mortgage regulations, implemented post-2008 crisis, aimed to mitigate banking risks by setting strict borrowing and repayment criteria. Key measures included an 85% loan-to-value (LTV) cap, requiring a minimum 15% down payment, and mandatory annual amortisation for borrowers whose mortgage exceeded certain loan-to-value or income thresholds. While these rules helped control household debt-among the highest in Europe-they have faced criticism for making homeownership more challenging for first-time buyers and those without significant capital reserves.
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