Swedish government proposes loosening up mortgage rules
The Swedish government and the Sweden Democrats have proposed reducing the country's amortisation requirement for mortgages as well as lowering the necessary size of a deposit from 15 percent of the property's value to 10 percent.
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A softening of mortgage requirements will make it easier for young people to enter the housing market, the Swedish government said as it presented the proposal.
The government also hopes that the proposed measures will reduce the number of people taking out expensive consumer loans to finance a property purchase.
READ ALSO: How a new proposal could make it easier to get on the Swedish housing ladder
"It is fundamentally healthy to own your own property, but unhealthy to have a consumer loan," financial market minister Niklas Wykman said at a press conference. "This will help people to cut their consumer loans and borrow more using their property as security."
Wykman said that the government believes this could lead to higher property prices in the short term, with a greater supply of homes in the long term.
The parties also proposed changing the amortisation requirement, abolishing the rule that households with mortgages more than 4.5 times their income have to amortise an extra percent on their mortgages, arguing that this will lower the threshold for accessing the housing market while also improving household finances.
Sweden's base amortisation rule, which requires mortgage holders to amortise one percent of their mortgage per year if their mortgage is between 50 and 70 percent of the value of the property, or two percent for loans over 70 percent, will remain the same.
The Riksbank central bank and the Financial Supervisory Authority have been critical of the planned changes to the rules, with their objections including concerns that they will lead to increased household debt, thereby affecting Sweden's economic stability.
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Wykman said the goal of the new proposal is to 'protect a healthy amortisation culture without putting up unnecessary barriers'.
'You need different types of rules to make sure that debt doesn't take off in a way which would be unsustainable for households and for the economy,' the minister said.
'Our starting point is that you should pay back your debts – a loan is a loan.'
The new rules have a proposed implementation date of April 1st, 2026.
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