In recent weeks, both the Governor of the Swedish Central Bank, Erik Thedéen, and the Deputy Governor, Aino Bunge, have expressed criticism of the government-commissioned investigation into the mortgage repayment requirement and the mortgage cap.

Bunge stated last week, “Making it easier to borrow does not solve the long-term challenges,” and as recently as Tuesday, Thedéen said, “I believe that households are more resilient with mortgage repayment requirements and mortgage caps than they would be without them, and easing credit rules too much risks reversing this trend. There is a risk that the proposals from the investigation could drive up housing prices, increase household debt, and make households more vulnerable to disruptions.”

Now, another dynamic duo is joining the chorus of dissent. Nordea’s Chief Economist, Annika Winsth, and Chief Analyst, Torbjörn Isaksson, are also criticizing the proposals from the investigation.

Winsth commented on Wednesday during a presentation of the bank’s economic forecast, “We stand behind Erik Thedéen on this.” She emphasized that the Governor’s critical assessment of the proposals is justified. When it comes to mortgage issues, she stressed the importance of stability.

Isaksson echoed her sentiments, stating that it is unnecessary to make adjustments to this regulatory framework. Winsth added, “At some point, you also send signals that it’s okay to engage in fine-tuning. I often see ideas and thoughts where people believe they can adjust perfectly. But that’s not how the economy, households, or the housing market work.”

She continued, “It’s important to remind ourselves that in the instances where crises and crashes have occurred in housing markets, both in Sweden and abroad, housing prices remain very high for many years before returning to normal.”

The investigation, initiated in 2023 by the current government, was submitted to Finance Minister Niklas Wykman (M). The proposal can be divided into three main points:

1. The mortgage cap, according to the investigation, should be maintained but raised from the current 85% to 90%. However, the proposal acknowledged the difficulty in determining the exact appropriate level.
2. The current requirement of a 1% repayment should only apply when the loan-to-value ratio exceeds 50%.
3. A debt-to-income ratio cap on mortgages is proposed, making it impermissible to borrow more than 5.5 times one’s annual income.

These recommendations have sparked a debate among experts and policymakers, with concerns about the potential impact on the stability of the housing market and household finances. The pushback from Thedéen, Bunge, Winsth, and Isaksson highlights the complexity and significance of these proposed changes in the regulatory framework. As discussions continue, the future of mortgage regulations in Sweden hangs in the balance, with critical voices urging caution and foresight in decision-making.

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