The Swedish Mortgage Market 2023

The Swedish financial regulator, Finansinspektionen (FI), has published its annual summary report on the condition of the Swedish mortgage market. The report is based on a sample of new mortgages concluded in the fall of 2022, thereby reflecting – to some extent – the rising interest rates since the onset of the Ukrainian conflict, the subsequent surge of inflation, and falling housing prices. The key facts of the report are briefly noted below:
– Mortgage activities generally declined in 2022 to pandemic levels in 2019.
– The average mortgage taken out was about as high as those in 2021.
– The loan-to-value ratio and the loan- to-income ratio stayed nearly the same compared to the year before.
– The loan-to-income ratio, however, showed some variations compared to previous years, with fewer ratios beyond 450% and more beyond the 70%.
– Due to the rising interest rates, around 10% of income went to the servicing of interest on new mortgages.
– The share of mortgages with variable interest rates increased significantly in 2022; in fact, it was the largest since 2016.
– Many borrowers are now subject to additional vulnerabilities, particularly those with variable interest rates, due to the increased cost of living overall.
– Many borrowers have relatively small margins when it comes to income surplus and allocation.
– New mortgage loans tend to be relatively high with high interest rates.
– Housing prices, on the other hand, have fallen which is likely to notably impact the loan-to-value ratio in the short-term.
– As much as 12% – 17% of mortgagors would experience negative cash flows if they were to become unemployed which is threefold compared to the year before.
– Riksbank estimates that about one third of mortgagors would „experience a deficit following a large increase in the mortgage rate“, leaving them highly vulnerable at the present.