EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 24 March 2016  
on mortgage amortisation requirements  
(CON/201 6/18) 
 
Introduction and legal basis  
On 5 February 2016, the European Central Bank (ECB) received a request from Finansinspektionen (the 
Swedish financial s upervisory authority ) for an opinion on a draft proposal for a regulation establishing 
mortgage amortisation requirements (hereinafter the ‘ draft proposal ’). 
The ECB’s competence to deliver an opinion is based on Articles  127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the sixth  indent of Article 2(1) of Council Decision 98/415/EC1, as 
the draft proposal  relates to rules applicable to financial institutions insofar as they  materially influence the 
stability of financial institutions and markets . In accordance with the first sentence of Article 17.5 of the 
Rules of Procedure of the European Central Bank, the Governing Counc il has adopted this opinion.   
 
1.  Purpose of the draft proposal  
1.1 The overall purpose of the draft proposal is to limit household indebtedness.  The rules set out in 
the draft proposal would apply to new mortgages for the domestic housing market in Sweden. All 
firms subject to Finansinspektionen’s supervision would be covered by the regulation.  Hence , it 
would apply to virtually all firms providing loans , i.e. banks, savings banks, cooperative banks and 
other credit institutions .  
1.2 According to Finansinspektionen, a rising share of new mortgage debtors  in Sweden take out 
mortgages that exceed 50 % of the value of the home. In addition, a large percentage of loans in 
Sweden are not amortised at all but prolonged at maturity. Finansinspektionen ’s data for  2014 
records that only 60 % of households made principal payments on their mortgages . Moreover, 
some households have unduly optimistic expectations of future housing prices and interest rate 
levels. Finansinspektionen ’s data shows that  overall hous ehold indebtedness is high in relation to 
disposable income. This poses a threat to the Swedish economy  because  highly l everaged 
households are found to be sensitive to economic shocks, such as unexpected changes in income, 
housing prices or interest rates. Finansinspektionen considers  that the main risks lie with 
households whose mortgages exceed 50 %  of the value of the property securing the mortgage.  
1.3  The draft proposal provides that all new loans  granted for housing purposes (i.e. a leasehold right 
for a property or site which is intended for housing for one or two families , or a condominium  or 
                                                 
1  Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national 
authorities regarding draft legislative provisions ( OJ L 189, 3.7.1998, p. 42) .  
ECB -PUBLIC  
2 apartment owned by a housing cooperative)  on or after  1 June 2016 and secured by a property 
must include provisions on amortisation requirements if the mortgage exceeds 50 % of the 
property’ s market value.    
1.4 The draft proposal also provides that the amortisation requirements apply to existing loans if the 
existing loan amount is increased. T he amortisation amount is calculated on the basis of total 
indebtedness  (i.e. existing indebtedness  together with the increased loan amount ).  
1.5 As risks increase with higher household indebtedness , the draft proposal adopts a progressive 
amortisation requirement according to which new mortgages exceeding 70 % of the property’s  
market value must be amortised by at least 2 % per year of the total loan amount , and by at least 
1 % per year of the total loan amount  when the new mortgage amounts to more than 50 but less 
than 70 % of the property’s  market value.   
1.6 In order to avoid the regulation increas ing cyclical fluctuations, the draft proposal provides that as a 
general rule the market value of a property  should not be reassessed more than once every  five 
years. Howev er, a revaluation of a property may be performed more frequently than once every 
five years  if there has been a considerable change in the property’s market value for reasons other 
than the general trend in house pric es e.g. because the property has undergone extensive 
renovation, conversion or extension.  
1.7 The draft proposal includes  an option for lenders  not to apply the amortisation requirements in 
relation to loans  granted to finance the acquisition of newly constructed home s. A borrower 
acquiring a newly constructed home would be exempt from the mortgage amortisation 
requirements . In addition, the draft proposal provides that exemption shall be given on a temporary 
basis  in a number of situations including unemployment, sickness or death in the family. Such  
exemptions shall cater for special circumstances where a borrower  is unable to amortise the 
mortgage.  These exemptions are at the discretion of the lender  and not specified further in the draft 
proposal .  
1.8 Finally, regarding the legal basis for the draft proposal, the ECB understands that a proposal for 
new rules regarding mortgage amortisation requirements is contained in a Government Bill  pending 
before the Swedish Parliament (Riksdag)2. According to the preparatory work to the Government 
Bill, there are reasons for the Government to combine an authorization to Finansinspektionen to 
issue more detailed regulations on amortization requirements with a requirement that Finansinspektionen must obtain the Government’s consent before such regulations enter into 
force.
3  
 
                                                 
2  Proposition 2015/16:89. In the proposal, it is proposed that a new legal provision regarding an amortisati on 
requirement will be introduced into Chapter 6, section 3b of the Swedish Banking and Financing Business Act (Sw. 
lag (2004:297) om bank - och finansieringsrörelse.  
3  A requirement for authorized authorities to obtain the consent of the Government is generally required when 
proposed regulations can result in essential costs for the State, a municipality or a county due to a generally 
applicable regulation (Regulation (2014: 570) on the Government's consent to the adoption of certain regulations) 
(Sw. Förordning (2014:570) om regeringens medgivande till beslut om vissa föreskrifter).  
ECB -PUBLIC  
3 2.  General observations  
2.1 The ECB understands that house prices  and household indebtedness have increased markedly in 
Sweden since the mid- 1990s , while the general propensity  to amortise mortgage loans has 
decreased. Against this background, t he ECB welcomes the core objectives  of the draft proposal , 
namely  to limit h ousehold indebtedness  and mitigate the risks to financial stability associated with 
high indebtedness . 
2.2 The ECB refrains from making any observations regarding the possible institutional implications for 
Finansinspektionen ’s operational independence as a macroprudential authority  arising out of  the 
potential requirement that Finansinspektionen must obtain the Government’s consent before any  
regulations on amortization requirements enter into force.  
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main, 24 March 2016.  
 
[signed]  
 
The President of the ECB  
Mario DRAGHI