Swedish Government Proposes Mortgage Regulation Changes Amid Housing Market Concerns
Swedish government plans to raise mortgage loan-to-value limits and ease amortization, prompting concerns about rising household debt and housing prices.
- • Government proposes raising mortgage loan-to-value ratio from 85% to 90%.
- • Stricter amortization rules for high-income loans to be removed by spring 2026.
- • Financial Supervisory Authority warns of stability concerns with fragmented oversight.
- • Riksbank cautions potential rise in housing prices and debt levels due to changes.
- • LO and business groups generally support proposals despite some reservations.
Key details
The Swedish government, together with the Sweden Democrats, has proposed significant alterations to mortgage regulations, aiming to increase borrowing capacity by raising the loan-to-value ratio from 85% to 90%. This move seeks to ease access to homeownership for young buyers by lowering the required down payment. Under the new proposal, the annual amortization requirement remains at 1% for loans between 50% and 70% of the property value and 2% for loans above 70%. However, the stricter additional amortization condition for loans exceeding 4.5 times the borrower's gross income will be removed by spring 2026.
The regulation framework will shift from oversight by the Financial Supervisory Authority to governance under a new law. Additional borrowing will be capped at 80% of the property's market value, and property revaluation to expand borrowing eligibility will be allowed only every five years.
Financial authorities have expressed concerns regarding these changes. The Financial Supervisory Authority worries about financial system stability if supervisory responsibilities are fragmented among multiple agencies. The Riksbank doubts that the increased borrowing limit will meaningfully expand homeownership and warns of potential upward pressure on housing prices and rising household debt levels. The Swedish Consumer Agency highlights increased vulnerability of borrowers to interest rate rises and potential housing price declines resulting from larger mortgages.
Meanwhile, the LO union supports the proposals for easier market entry and does not foresee a risk to financial stability. The business sector, including Svenskt Näringsliv, generally welcomes the changes, though some groups like the Villaägarnas riksförbund express skepticism that the measures alone can sufficiently address the challenges young buyers face due to the dysfunctional housing market.
The debate continues over balancing improved access to property ownership with safeguarding financial stability, as stakeholders weigh the risks of increased household debt and more sensitive interest rate exposure against the benefits of higher borrowing capacity and eased amortization rules.