Swedish FSA to go forward with plans for tougher mortgage rules

[STOCKHOLM] Sweden should introduce further measures to cool its housing market, the head of the Financial Supervisory Authority said on Monday, despite signs that tighter mortgage rules are having an effect on borrowing and prices.

Sweden's housing market has been a source of concern for years. Ultra-low rates, decades of underbuilding and a highly regulated rental market have forced up prices and borrowing to alarming levels.

The FSA has introduced a loan-to-value cap and tighter mortage rules and the pace of growth in mortgage borrowing has slowed. Some recent figures show prices have dropped slightly.

Director General Erik Thedeen said more needed to be done.

"If you just take the last three years, prices are up nearly 40 per cent and household debt is up 20 per cent," he said in daily Dagens Nyheter.

Years of under-target inflation have left the Riksbank in cautious mode and it has hung on to negative rates. Inflation has picked up - coming in above the 2 per cent target for the last three months - but the Riksbank argues it is too soon to tighten policy as the upward trend is not yet stable.

Thedeen said it was unclear if a recent slowdown in price rises was a temporary pause and whether the upward trend would be renewed.

"Households' debts are still rising faster than incomes and real estate prices remain high. As a result, we still need to take measures," he said.

The FSA said earlier this month it hoped a fresh proposal for tougher amortization requirements for highly indebted households would come into force next March.

REUTERS