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Challenges with high household debt levels - a Swedish perspective
Challenges with high household debt levels - a Swedish perspective
Challenges with high household debt levels - a Swedish perspective
Challenges with high household debt levels - a Swedish perspective
Challenges with high household debt levels - a Swedish perspective
Challenges with high household debt levels - a Swedish perspective
Challenges with high household debt levels - a Swedish perspective
Challenges with high household debt levels - a Swedish perspective
Challenges with high household debt levels - a Swedish perspective
Challenges with high household debt levels - a Swedish perspective
Challenges with high household debt levels - a Swedish perspective
Challenges with high household debt levels - a Swedish perspective
Challenges with high household debt levels - a Swedish perspective
Challenges with high household debt levels - a Swedish perspective
Challenges with high household debt levels - a Swedish perspective
Challenges with high household debt levels - a Swedish perspective
Challenges with high household debt levels - a Swedish perspective
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Challenges with high household debt levels - a Swedish perspective

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A presentation held by Lord Adair Turner from INET at Global Utmaning's and the Swedish House of Finance's seminar "Combating the Debt Addiction" at the Stockholm School of Economics, Thursday May 22, …

A presentation held by Lord Adair Turner from INET at Global Utmaning's and the Swedish House of Finance's seminar "Combating the Debt Addiction" at the Stockholm School of Economics, Thursday May 22, 2014.

Published in: Economy & Finance, Business
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  • 1. Finansdepartementet Challenges with high household debt levels - a Swedish perspective Minister for Finance Anders Borg Thursday May 22, 2014
  • 2. Finansdepartementet Household debt and post-tax interest expenditure Per cent of disposable income Source: Riksbank
  • 3. Finansdepartementet 0 50 100 150 200 250 300 1995 1997 1999 2001 2003 2005 2007 2009 2011 SE FI DK NL IE ES An international phenomenon Households’ debt to disposable income ratio, per cent. 1995-2011 Source: Eurostat
  • 4. Finansdepartementet High debt ratios for mortgage borrowers Data from July 2013. Source: Riksbank
  • 5. Finansdepartementet Debt-to-households’-disposable- income ratios in different regions Data from July 2013 Source: Riksbank
  • 6. Finansdepartementet Average loan-to-value ratio for new loans Per cent Source: FSA
  • 7. Finansdepartementet What can explain the rise in debt levels? - Rising household incomes and lower taxes - Low real interest rates - Low construction means limited supply - Conversion of rental housing into condominiums - Increased demand for central location means higher average home prices
  • 8. Finansdepartementet Risks from high household debt • Macroeconomic – if interests rates rise dramatically, and/or home prices drop, consumption could be negatively affected and hit aggregate GDP growth • Financial sector - lower consumption and weaker growth may in turn cause credit losses in the banking system • Individual households - risks of insolvency of individual households with small financial margins
  • 9. Finansdepartementet Households have strong balance sheets Household assets and liabilities in percent of disposable income Source: Riksbank
  • 10. Finansdepartementet Growth rate of household loans Source: Statistics Sweden
  • 11. Finansdepartementet The Swedish Government’s measures to dampen household credit growth • Higher risk weights on mortgages • Loan-to-value cap (LTV) • Individual amortisation plans • FSA analysis of banks’ tests of household credit worthiness
  • 12. Finansdepartementet Higher capital requirements on large banks Core equity requirements in percent of risk-weighted assets The November 2011 argreement: CET1 > 12% Regulatory basic capital requirements Institution specific pillar 2 requirements Mortgage risk weights 15% Mortgage risk weights 25% Systemic risk in pillar 2 Systemic riskbuffer Countercyclical buffer (not set yet) Capital conservation buffer The FSA:s new policy: CET1 > 16,4%
  • 13. Finansdepartementet Swedish housing construction low Number of housing starts per 1 000 inhabitants
  • 14. Finansdepartementet … but housing construction is picking up 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Småhus Hyresrätter Bostadsrätter Flerfamiljshus totalt Nybyggnad totalt OmbyggnadHome reconstruction Rental housing Source: The Swedish National Board of Housing, Building and Planning Forecast 2015: 38 000 homes Single family houses Apartments total New homes total XXXXXXX
  • 15. Finansdepartementet Potential hurdles before a building project can start Appeals Noise regulations Infrastructure ”NIMBY” Lack of municipality plans and land-use plans National interest Planning processes Lack of a uniform, national application of rules and regulations
  • 16. Finansdepartementet Government strategy to improve the housing market • More efficient use of the stock of dwellings • A better functioning housing market • Shorter time span from conception to finished home
  • 17. Finansdepartementet Summing up • Household debt levels are high, but so are asset levels • A number of measures taken to stimulate gradual downward trend in debt-to-income ratios • Measures taken to address supply side restrictions in housing market • Continue close monitoring of debt developments, prepared to act if trends go the wrong way

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