The July upturn in the indicator is broadly based across regions with the South and South East recording the largest gains, but Stockholm continuing to be at the highest level increasing to 74 from 66. Interestingly, the survey was undertaken before the Riksbank's rate cut was announced and the repo rate is now well below the 0.84 per cent the household predict in 12 months. After the Riksbank's surprisingly large rate cut last week, the Housing Price Indicator could very well continue to increase to a new all-time high later in the summer. The continued upturn in our indicator implies that the acceleration in house prices seen over the last 3-4 months will continue in the near term.
Few households plan to increase borrowing
A bit at odds with the upbeat price expectations, the share of households planning to increase or take up new loans has declined to 3 per cent totally reversing the upturn to 6 per cent in May. This indicates that the signs of a marked acceleration in household lending growth over the last 2-3 months could prove to be temporary.
Amortisation requirements likely to increase
The Monetary Policy Report from last week indicates that the majority of the Riksbank’s board has accepted that financial stability will be handled by macro prudential policies rather than the repo rate. There are also signs that the Riksbank's calls for more measures to mitigate the accelerations in lending and house prices will be met with Finance Minister Anders Borg stating that tighter rules for amortisations will be presented during the summer. It remains to be seen whether this will be sufficient to dampen the impact from even lower mortgage rates on the household borrowing and house prices.