It will take time for the measures introduced to affect all households with mortgages It is now important to take measures to improve the long-term functioning of the housing market, which will both reduce the risks we find worrying and also create the conditions for the healthy development of society. Measures within several policy areas will be needed to achieve this. One area where we have seen measures is macroprudential policy. Finansinspektionen (the Swedish financial supervisory authority) has taken measures to reduce the risks inherent in household indebtedness and to increase resilience against shocks. This is welcome and positive. However, the measures introduced, such as a loan-to-value limit and amortisation requirements, affect new loans only, and it will therefore take time before they affect all households with mortgages. Some of the macroprudential policy measures have also been criticised. Among other things, the amortisation requirements have been accused of making it difficult for some groups, such as first-time buyers, to enter the housing market, as the requirements restrict households’ scope for borrowing. This is, however, part of the aim of the amortisation requirements and, without these restrictions, household indebtedness would also risk continuing to increase at an excessively rapid rate. Without an effective macroprudential policy, borrowing households would choose to borrow more and demand more housing, without considering that, when all borrowers behave like this, housing prices are pushed upwards. 4 Higher housing prices mean that borrowers must cut back on other consumption and work more, which decreases their welfare over the long term.

It should also be remembered that households still have the possibility of borrowing large amounts to finance housing purchases. I consider that it is therefore somewhat misleading to claim that certain groups have been completely ‘excluded’ from the housing market due to the amortisation requirements. As far as newly built homes go, these are exempt from the amortisation requirements and it is up to individual banks to decide whether their customer’s credit  23 European Commission (2019). 24  Finansinspektionen (2019). 25 See also Cunliffe (2019) for similar results in the United Kingdom. 8 [13]  rating makes additional amortisation necessary. Consequently, the amortisation requirements, at present, should benefit newly built tenant-owned apartments. The aim of the macroprudential policy measures is to strengthen households’ long-term resilience in two ways: by ensuring that they do not borrow excessive amounts in relation to their incomes or the value of their homes, and to encourage households to create buffers by gradually amortising their loans. High stress rates in the calculations made by the banks to estimate households’ ability to repay loans are, in turn, aimed at ensuring that the households will be able to cope with a significantly higher level of interest rates than prevails at present. 26 If a household fails the credit assessment, it is conceivable that the household will have to increase the proportion of capital it invests, borrow less and/or purchase a cheaper home.