fall in housing prices. 2 in many countries, mortgages are amortised over periods of 20 to 40 years. this was also the case in sweden a few decades ago, but it subsequently became increasingly common with interest - only loans. over the past few years, a larger proportion of new mortgage borrowers have chosen to amortise their loans, but still at a slow rate. the proposal on stricter amortisation regulations presented by finansinspektionen ( the swedish financial supervisory authority ) last week corresponds to an amortisation rate of 78 years during the first decades of a mortgage. swedish housing investments have averaged approximately 3 per cent of gdp over the last ten years compared to almost 6 per cent in the euro area ( european commission 2014a ). according to the european commission ( 2014b ) sweden has the most strictly regulated rental market in the eu and moreover, because of low property taxes and generous interest - rate deductibility, the strongest tax incentives for owner - occupied housing. in recent years, over 70 per cent of new mortgage borrowers have chosen variable interest rates and only a few per cent have fixed their interest rates for more than five years. in many other countries, it is usual to fix interest rates for between 10 and 30 years. much of this is described in more detail in riksbank ( 2014a ). an important explanation of the high level of saving is collective pension saving, see nilsson et al. ( 2014 ). bis central bankers ’ speeches large debts and variable interest rates make the households vulnerable however, despite these and other mitigating arguments, i think it is clear that there are risks associated with the swedish housing and mortgage markets. that the households have bloated balance sheets, with both large debts and large assets, makes them vulnerable to shocks. this is partly because debts and assets are unevenly distributed between households, unequally liquid and have different risk profiles, and are thus not affected by shocks in the same way. vulnerability is then not necessarily a question of the households becoming insolvent, but rather of them reacting to shocks in a way that leads to a fall in consumption, and thus to a fall in growth and employment. 3 the high debts in combination with mainly variable mortgage rates imply of course that the households are sensitive to changes in interest rates. 4 to some extent this can be seen as an advantage as it means that monetary policy then has a greater direct impact on the economy. however, it

european commission ( 2014b ), institutional features and regulation of housing and mortgage markets, chapter 2 in quarterly report on the euro area, 13 ( 2 ). imf ( 2012 ), “ dealing with household debt ”, chapter 3 in world economic outlook. jorda, oscar, moritz schularick and alan taylor ( 2013 ), when credit bites back, journal of money, credit and banking 45 ( 2 ). mian, atif, kamelesh rao and amir sufi ( 2013 ), household balance sheets, consumption, and the economic slump, quarterly journal of economics 128 ( 4 ). nilsson, christian, jonas soderberg and anders vredin ( 2014 ), the significance of collective pension saving for the swedish financial system, economic commentary no. 3, the riksbank. the riksbank ( 2014a ), from a to z : the swedish mortgage market and its role in the financial system, riksbank studies, april. the riksbank ( 2014b ), households ’ sensitivity to interest rates, article in monetary policy report, october. the riksbank ( 2014c ), appendices to the memo amortisation requirements – a step towards a more sustainable debt situation, 11 november. bis central bankers ’ speeches