• Home
  • News
    • People moves
    • Africa
    • Asia
    • Australia
    • Canada
    • Caribbean
    • Domicile
    • Europe
    • Latin America
    • North America
    • Middle East
    • US
    • US
    • UK
  • Products
    • Funds
    • Pensions
    • Platforms
    • Insurance
    • Investments
    • Private Banking
    • Citizenship
    • Taxation
  • Fintech
  • Regulation
  • ESG
  • Expats
  • In Depth
  • Special Reports
  • Directory
  • Video
  • Advertise with us
  • Directory
  • Events
  • European Fund Selector
  • Newsletters
  • Follow us
    • Twitter
    • LinkedIn
    • Newsletters
  • Advertise with us
  • Directory
  • Events
    • Upcoming events
      event logo
      International Investment Nordic Summit 2021

      International Investment Nordic Summit 

      • Date: 09 Mar 2021
      • ONLINE, ONLINE
      View all events
  • European Fund Selector
International Investment
International Investment

Sponsored by

Sharing Alpha
  • Home
  • News
  • Products
  • Fintech
  • Regulation
  • ESG
  • Expats
  • In Depth
  • Special Reports
  • Video
  • Alternative

Sweden ditches amortisation requirement in response to Coronavirus

Sweden ditches amortisation requirement in response to Coronavirus
  • Jonathan Boyd
  • Jonathan Boyd
  • @jonathanboyd
  • 18 March 2020
  • Tweet  
  • Facebook  
  • LinkedIn  
  • Send to  

The Swedish Financial Superisory Authority (Finansinspektionen, FI) has determined that the loss of income due to Coronavirus constitutes "special grounds" necessary for lenders and borrowers to legally stop amortisation payments on loans.

The regulator has for a number of years sought to increase the amortisation burden to lower household leverage ratios, which surged in response to sharp rises in property prices over the past decade, leading borrowers previously on interest only or very low amortisation mortgages increaed their borrowings to fund discretionary spending on things such as cars, boats and holidays.

Related articles

  • Swedish fund industry braces for effects of loan amortisation requirements
  • Law changes in focus of Swedish fund industry
  • Ingves warns of need to 'remain vigilant'
  • Ingves warns of need to 'remain vigilant'

"The amortisation requirement is designed so that, under normal economic conditions, highly indebted households amortise their debt and thus increase their resilience," FI stated.

"The requirement has been designed in such a way that banks and borrowers can agree on an exemption from the requirement given special grounds. For example, households may find themselves in situations where their disposable income has unexpectedly decreased.

Erik Thedéen, director general, added: "The rules state that the banks may grant exemption from the amortisation requirement given special grounds. If the borrower loses income due to the spread of Covid-19, this qualifies as special grounds. This is FI's position, and we have made this clear to the banks. Due to the extraordinary circumstances, the banks may be generous in their application of the exemption."

According to the announcement:

  • It is up to the bank and the borrower to agree on the details of the exemption on a case-by-case basis.
  • The exemption should be evaluated on an ongoing basis.
  • The exemption may be extended, depending on how the economy develops and the type of the event that affected the borrower.
  • The exemption may apply for anywhere from 3 to 12 months, with the possibility of an extension.

FI also noted that banks "should be generous" in their application of the exemption in respect of self-employed persons.

Matching monetary policy

FIs actions come after Sweden's cental bank, Riksbanken, said last week that it would inject SEK500bn of 0% loans into the economy in order to defend liquidity - https://www.investmenteurope.net/news/4012377/sweden-riksbank-lends-sek500bn-banks.

The bank said earlier in its 12 February statement on interest rates that it did not foresee the repo rate rising above 0% until the first quarter of 2023.

Swedish mortgage borrowers often blend short and longer term rates. Currently, 5 year rates vary from around 1.3-2% according to Konsumenternas.se but specific amortisation requirements may vary from lender to lender, and borrower to borrower.

It is not yet clear to what extent mortgage rates could change in response to FI's statement on amortisation, but borrowers could see monthly costs of their mortgage loans fall to interest-only repayment levels.

InvestmentEurope has sought comment from the Swedish Bankers's Association on the possible effects this may have on its members.

 

  • Tweet  
  • Facebook  
  • LinkedIn  
  • Send to  
  • Topics
  • Alternative
  • Equities
  • sweden
  • Nordic
  • Nordics
  • Swedish Financial Supervisory Authority (Finansinspektionen)
  • coronavirus

More on Alternative

M&G taps Value Partners for £500m Chinese equities mandate

  • Equities
  • 16 December 2020
Global equities tumble on covid-19 fears and US jitters

  • Equities
  • 27 October 2020
BMO Global AM launches sustainable equity fund in China

  • ESG
  • 25 August 2020
HSBC Singapore launches first AI-powered equity index structured note

  • Equities
  • 13 August 2020
Comment: Behind every complex valuation is a combination of science and judgement

  • Comment
  • 17 July 2020
Back to Top

Most read

SharingAlpha's 2020 top rated funds by category revealed
SharingAlpha's 2020 top rated funds by category revealed
Duff & Phelps opens Gibraltar office
Duff & Phelps opens Gibraltar office
DeVere launches equity fund with Columbia Threadneedle Investments
DeVere launches equity fund with Columbia Threadneedle Investments
HNWIs in SE Asia cite lack of financial knowledge as greatest concern: report
HNWIs in SE Asia cite lack of financial knowledge as greatest concern: report
Tabula launches world's first Paris-aligned fixed-income ETF
Tabula launches world's first Paris-aligned fixed-income ETF
  • Contact Us
  • Marketing solutions
  • About Incisive Media
  • Terms and conditions
  • Policies
  • Careers
  • Twitter
  • LinkedIn
  • Newsletters

© Incisive Business Media (IP) Limited, Published by Incisive Business Media Limited, New London House, 172 Drury Lane, London WC2B 5QR, registered in England and Wales with company registration numbers 09177174 & 09178013

Digital publisher of the year
Digital publisher of the year 2010, 2013, 2016 & 2017
Loading