Swedish fund industry braces for effects of loan amortisation requirements

Jonathan Boyd
Swedish fund industry braces for effects of loan amortisation requirements

The Swedish Financial Supervisory Authority, Finansinspektionen, announced on 13 November that it would introduce tougher amortisation requirements for homeowners, in light of concerns around household debt levels.

Earlier this year the FI report Stability in the Financial System identified key concerns linked to house prices rising 40% over three years. FI director general Erik Thedéen then said:  “In order to further strengthen household resilience in a future crisis, FI would like to introduce a stricter amortisation requirement for new mortgage holders who take large loans in relation to their income.”

Now, the FI board is meeting to consider whether to introduce those new tougher requirements for borrowers. (A streamed press conference is taking place at 13.00 CET on 13 November, which will be available at www.fi.se )

The degree to which retail long term savers and investors will see their disposable income shrunk by amortisation requirements is of key concern to the fund industry locally, which recently reported record AUM held across the industry. Sweden’s capital Stockholm in particular has seen some of the fastest house price rises versus average wage gains in recent years of any city in Europe, and the expectations of stringent amortisation requirements for anybody borrowing more than 4.5x earnings is expected to hit both the inner city and suburbs.

Last week, the Swedish Investment Fund Association noted that new savings were at their highest levels for two years, with a trend for investors to put money into China and Japan equity funds over the previous month – suggesting risk appetite remains high.

However, Nordea Markets analysis of the Swedish housing market in the past week noted that prices fell in September, with further falls expected in the October figures, amid indications that the local property market may have peaked ( https://e-markets.nordea.com/#!/article/41349/sweden-expect-further-home-price-declines ). Any sustained decline could undermine consumer confidence and thereby propensity to save and invest if focus switches to paying off household debt.

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