According to the survey, household’s expectations for the central bank’s repo rate were slightly lower at 1.2 per cent in one year’s time. Contrary to the beginning of the year, sentiment is now positive in all regions. Sentiment in the South continued to rise strongly in May, although still lagging most other regions.
Slight Riksbank relief
Improved housing market sentiment has been reflected in signs of slightly increasing housing prices in recent months, while the downward trend in household lending growth has been halted.
SEB’s economists say that as such, the high level of the housing price indicator in May signals continued concern for the Riksbank, given its present policy dilemma between on the one hand concerns over high household indebtedness and on the other, too low inflation and risks for renewed appreciation of the krona from monetary policy easing abroad.
Still, the Riksbank should find some comfort in that the upward trend seems to have halted, the economists say. Going forward, improved risk appetite and rising equity markets suggest that sentiment on the housing market should remain firm.
However, signs of renewed rapid increases in housing prices and/or acceleration in credit growth are likely to be met with additional measures to halt lending. Before summer, a formal decision by the Finansinspektionen, Sweden’s financial markets regulator, to raise the risk weights for mortgage loans to a 15 per cent floor is expected. Furthermore, both finance minister Anders Borg and Riksbank governor Stefan Ingves have called for a further increase if needed. Also, banks are likely to remain under pressure to encourage more households to amortise.