The regional indicator for Stockholm increased further and is at one of the highest levels in the history of the series.
Rising trend to continue
The Housing Price Indicator suggests home prices will continue to trend higher. In recent months lending to household has been stable around long-term sustainable levels at slightly below 5 per cent compared to the same period a year ago. However, continued fast increases in home prices, especially on flats, could presage a renewed acceleration in lending. These risks are reinforced by the improved housing market sentiment.
In the middle of October, the Sweden’s financial supervisor, Finansinspektionen, made a proposal for individual amortisation plans, which was endorsed by the Swedish Bankers Association. It remains to be seen what effect this will have on household lending. So far, however, new macro prudential measures do not seem to have noticeably affected housing market sentiment.
Swedish Minister of Finance Anders Borg last week called for another rise in risk weights for mortgages, something which the Riksbank, Sweden’s central bank, has also repeatedly asked for.
While the FSA does not seem to be in a hurry to implement new measures at present, SEB’s economists see further increases in risk weights as increasingly likely. This should enable the Riksbank to focus more on inflation.
However, the economists believe that in the short-term the continued rise in the House Price Indicator suggests the board majority will feel a continued need to take household debt into account in their rate decisions. This indicates an upside risk to recent dovish market expectations.