Opinion of the European Central Bank of 4 August 2017 on an additional mortgage amortisation requirement (CON/2017/29)
Date: 2017-08-04
Institutions: European Central Bank
Subjects: Sweden, amortisation, financial stability, household consumption, indebtedness, mortgage, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 4 August 2017 

on an additional mortgage amortisation requirement 

(CON/2017/29) 

Introduction and legal basis 

On  3  July  2017,  the  European  Central  Bank  (ECB)  received  a  request  from  Finansinspektionen  (the 

Swedish financial supervisory authority) for an opinion on a draft proposal for a regulation establishing an 

additional mortgage amortisation requirement (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 contains 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 Council has adopted this opinion. 

1.  

Purpose of the draft proposal 

1.1  The  overall  purpose  of  the  draft  proposal  is  to  further  limit  household  indebtedness  and  to 

counteract macroprudential and financial stability risks associated with excessive indebtedness as 

well  as  to  further  increase  households’  resilience  to  macroprudential  disturbances.  The  rules  set 

out  in  the  draft  proposal  would  apply  to  new  mortgages  for  the  domestic  housing  market  in 

Sweden.  All  institutions  subject  to  Finansinspektionen’s  supervision  would  be  covered  by  the 

regulation. Hence, it would apply to virtually all institutions providing loans to individuals, i.e. banks, 

savings banks, cooperative banks and other credit institutions. 

1.2  Finansinspektionen introduced a progressive amortisation requirement in 2016, which is based on 
a loan-to-value ratio2. Pursuant to that requirement, new mortgages exceeding 70 % of a 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 if the new mortgage amounts to more than 50 % but less than 

70 % of the property’s market value (hereinafter the ‘2016 Amortisation Requirement’). According 

to Finansinspektionen, the 2016 Amortisation Requirement has led to a decrease in debts among 

new  mortgage  debtors  in  Sweden,  which  in  turn  has  strengthened  the  resilience  of  such  debtors 

against  macroprudential  instabilities.  However,  mortgage  debtors’  indebtedness  has  continued  to 

increase  in  relation  to  their  income  (‘debt-to-income  ratio’).  As  a  result,  Finansinspektionen  does 

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2  

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). 
See Opinion CON/2016/18. All ECB opinions are published on the ECB’s website at www.ecb.europa.eu.  

 
 
 
 
 
                                                 
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ECB-PUBLIC 

not consider that the 2016 Amortisation Requirement ensures an adequate decrease in mortgage 

debtors’ debt-to-income ratio over time. Hence, households’ mortgage debts are likely to increase 

significantly faster than their income. 

1.3   Since macroprudential risks increase in correlation with high debt-to-income ratios among Swedish 

households,  the  draft  proposal  proposes  to  introduce  an  amortisation  requirement  based  on  the 

debtor’s  debt-to-income  ratio.  More  precisely,  this  would  mean  that  an  individual  with  total 

mortgage  debts  exceeding  450  %  of  the  individual’s  gross  income  (i.e.  annual  income  before 

deducting taxes) must amortise any new mortgage granted after 31 December 2017 with a yearly 

amount equal to (at least) 1 % of the individual’s total mortgage debts (i.e. any existing mortgages 

together with the new mortgage). 

1.4  The  new  rules  will  apply  in  addition  to  the  2016  Amortisation  Requirement.  Consequently,  a  new 

mortgage  credit  granted  after  31  December  2017  to  an  individual  with  a  debt-to-income  ratio 

exceeding 450 % must be amortised by at least 1 % if the loan-to-value ratio is below 50 %, and by 

at least 2 % if the loan-to-value ratio exceeds 50 % but is less than 70 % and, finally, by at least 3 

% if the loan-to-value ratio exceeds 70 %. 

1.5  The  draft  proposal  provides  an  option  for  lenders  to  offer  their  customers  an  alternative 

amortisation  option.  As  an  alternative  to  the  additional  1  %  amortisation  requirement  set  out  in 

paragraph 1.4, an individual with existing mortgage debt, granted prior to 1 January 2018, who is 

granted a new mortgage after 1 January 2018, provided that the new mortgage is collateralised by 

the same residential property as the existing mortgage, may choose to amortise the new mortgage 

loan each year by an amount equal to at least 10 % of the initial new mortgage amount. 

1.6  Given  that  the  draft  proposal  provides  that  the  debt-to-income  ratio  must  be  established  on  the 

basis  of  an  individual’s  gross  income,  the  amortisation  requirement  will  only  apply  to  individuals 

and not to legal entities. 

1.7   Similarly  to  the  2016  Amortisation  Requirement, the  draft  proposal  includes  an  option  for  lenders 

not to apply the amortisation requirements for an initial five-year period for loans granted to finance 

the  acquisition  of  newly  constructed  homes.  In  addition,  the  draft  proposal  provides  that  an 

exemption may be granted on a temporary basis in a number of situations, such as unemployment, 

sickness or death in the family. Such exemptions apply in special circumstances where a borrower 

is unable to amortise the mortgage. These exemptions are at the discretion of the lender and are 

not specified further in the draft proposal. 

1.8  Finally,  the  legal  basis  for  the  draft  proposal  is  the  same  as  for  the  2016  Amortisation 
Requirement3. This means that Finansinspektionen must obtain the Government´s consent before 
the new amortisation regulation enters into force4.   

3  

4  

Chapter 6, Section 3b and Chapter 16, section 1, point 4 of the Swedish Banking and Financing Business Act (Sw. 
Bank- och Finansieringsrörelselagen), which entered into force on 1 May 2016. 

Chapter 5, Section 2a of the Regulation on Swedish Banking and Financing Business (Sw.  Förordning (2004:329) 
om bank- och finansieringsrörelse), which entered into effect on 1 May 2016. 

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ECB-PUBLIC 

2.   General observations  

2.1  The ECB recognises that macroprudential risks increase as households’ debt-to-income ratios, and 

in  particular  mortgage-debt-to-income  ratios,  rise.  The  ECB  would  once  again  repeat  its  positive 

view  regarding  implementing  macroprudential  tools  to  foster  a  sound  amortisation  culture  and  to 
counteract excessive household indebtedness and financial instabilities5. Against this background, 

the ECB welcomes the core objectives of the draft proposal, namely to limit excessive household 

indebtedness  and  to  counteract  macroprudential  and  financial  stability  risks  as  well  as  to  further 

increase households’ resilience in relation to macroprudential instabilities. 

2.2  Although the regulation including the 2016 Amortisation Requirement6 (hereinafter the ‘Regulation’) 

explicitly  states  that  all  Swedish  credit  institutions  subject  to  Finansinspektionen’s  supervision 
would  be  covered  by  the  Regulation,  the  decision  memorandum  to  the  Regulation7  further  states 

that the 2016 Amortisation Requirement also covers foreign firms that grant mortgages in Sweden 

through branches or in some other manner. As the purpose of the draft proposal is, in addition to 

addressing  the  macroeconomic  risks  stemming  from  household  indebtedness,  to  protect 
consumers  in  Sweden,  the  Regulation  is  to  apply  to  all  credit  institutions  active  in  the  country8. 

Considering  this,  the  ECB  understands  that  the  Regulation  will  not  apply  to  Swedish  institutions 

granting mortgages to consumers outside Sweden through branches or in some other manner. 

2.3  The ECB refrains from making any observations regarding the possible institutional implications for 

Finansinspektionen’s  operational  independence,  as  the  competent  supervisory  authority  dealing 

with macroprudential affairs, arising out of the potential requirement that Finansinspektionen must 

obtain  the  Swedish  Government’s  consent  before  any  regulations  on  macroprudential  tools  enter 
into force9. 

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 4 August 2017. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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6  

7  

8  

9  

See paragraph 2.2 of ECB Opinion CON/2016/18 and paragraph 2.1 of ECB Opinion CON/2017/14. 
Section1  of  Finansinspektionen’s  regulations  regarding  amortisation  of  loans  collateralised  by  residential  property, 
FFFS 2016:16. 

Decision Memorandum ‘Regulations regarding mortgage amortisation requirement’ by Finansinspektionen dated 16 
May 2016, FI Ref. 14-16628. 
See Section 2.7 of the Consultation Memorandum ‘Proposed additional repayment requirements for households with 
high debt ratios’ by  Finansinspektionen dated 22 June 2017, FI Dnr 17-9236. 
See paragraph 2.2 of ECB Opinion CON/2016/18 and paragraph 2.1 of ECB Opinion CON/2017/14. 

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