In Sweden, the population now has more loans than ever, but that does not mean that they are financially worse off. 20 years ago, the loan was almost half of what it is now, which makes it record-breaking. However, it has a lot to do with the fact that interest rates are much better now than in the 1990s and it is the interest payments that determine how indebted a household is. At the end of 2018, the interest rate ratio was 2.4 percent, compared with 11.2 percent in 1990, which is a significant difference.
To get the best interest rate on a loan, borrowers usually use services that compare loans. This means that you as a borrower can be sure that you will get a loan at the lowest interest rate possible. How low the interest rate you get depends on your credit rating and it is calculated based on a number of different factors. There are comparison sites that do not use UC in credit reporting to prevent you from receiving inquiries that lower your credit rating. This makes it advantageous for you to take out a loan without collateral if needed.
Measures from the Swedish Financial Supervisory Authority
Increased indebtedness obviously means increased risks as interest rates are not constant and can rise at any time. The Swedish Financial Supervisory Authority has therefore implemented some measures during the 2010s to reduce risks. Among other things, you cannot borrow more than 85 percent of the value of your home when you have it as collateral. There are also repayment requirements for your loan amount to decrease while you pay and increase if you borrow more than 4.5 times your gross income.
The Swedish mortgage market
Debt has risen significantly in the Swedish mortgage market, which is understandable thanks to the rapidly rising housing prices. House and apartment prices continue to increase in value, which is precisely why Moneythink Finance made the amortization requirement more stringent. This has contributed to a reduction in the average debt ratio during 2018, as has the proportion of borrowers with a high debt ratio. The introduction of the regulation has resulted in cheaper housing being purchased, if the amortization requirement had not existed, it would have been easier to buy more expensive housing. 82 per cent of households’ total debt consists of mortgage loans in 2019.