if incomes unexpectedly fall. indeed, there is little doubt that virtually any debt burden becomes oppressive if incomes fall significantly. but rising debt - to - income ratios can be somewhat misleading as an indicator of stress. indeed the ratio of household debt to income has been rising sporadically for more than a half - century, a trend that partly reflects the increased capacity of ever - wealthier households to service debt. moreover, a significant part of the recent rise in the debt - to - income ratio also reflects the remarkable gain in homeownership. over the past decade, for example, the share of households that owns homes has risen from 6 percent to 69 percent. during the decade a significant number of renters bought homes, thus increasing the asset side of their balance sheets as well as increasing their debt. it can scarcely be argued that the substitutions of debt service for rent materially impaired the financial state of the new homeowner. yet the process over the past decade added more than 10 percent to outstanding caroline freund, “ current account adjustment in industrialized countries, ” board of governors of the federal reserve system, international finance discussion paper no. 692, december 2000. mortgage debt and accounted for more than one - seventh of the increase in total household debt over that period. 8 thus, short of a period of overall economic weakness, households, with the exception of some highly leveraged subprime borrowers, do not appear to be faced with significant financial strain. with interest rates low, debt service costs for households are average, or only marginally higher than average. adding other fixed charges such as rent, utilities, and auto - leasing costs does not materially alter the change in the degree of burden. even should interest rates rise materially further, the effect on household expenses will be stretched out because four - fifths of debt is fixed rate of varying maturities, and it will take time for debt to mature and reflect the higher rates. despite the almost two percentage point rise in mortgage rates on new originations from mid - 1999 to mid - 2000, the average interest rate on outstanding mortgage debt rose only slightly, as did debt service. in a related concern, a number of analysts have conjectured that the extended period of low interest rates is spawning a bubble in housing prices in the united states that will, at some point, implode. their concern is that, if this were to occur, highly leveraged homeowners will be forced to sharply curtail

lending potential and interest rates of banks and mortgage institutions are also important. access to loans increases the chances of realising an increase in value but also makes it possible to finance a house purchase. in addition to the inflation target, the riksbank has the task of promoting finan - cial stability, which is a prerequisite for a proper implementation of monetary policy. a functional payment system, capital supply and arrangements for spreading risks are a precondition for the efficient working of the economy in general. an important instrument for the riksbank ’ s work on stability is the twice - yearly publication of a report that evaluates the risks in the financial system. lending to households and the development of house prices have been recurrent themes in the financial stability report in recent years. among other things, the reports have presented assessments of whether the banks ’ credit risk exposures, for instance to households in sweden, could threaten financial stability. the assessments of inflation normally presuppose that no major problems will arise in the financial system ― credit supply, payment mediation and risk sharing are assumed to function normally. if financial stability were to be threatened, that would of course have to be taken into account when deciding on monetary policy. our assessments households are not a direct threat to financial stability in the latest financial stability report, published in june, the riksbank stated that the risk of households incurring large loan losses for swedish banks is very small. so the rapid growth we have seen in lending to households does not constitute a threat to financial stability. although indebtedness has increased markedly in the past decade, low interest rates have lightened the burden of servicing debt. in aggregated terms, interest expenditure adds up to little more than 3 per cent of household income, which can be compared with over 10 per cent in the early 1990s. the debt - servicing burden of indebted households is low. micro studies also show that indebted households in general have comfortable margins and would therefore cope with interest expenditure even with interest rates that are considerably higher than at present. approximately 70 per cent of the loans have been obtained from mortgage institutions with the residential property as collateral. an important issue in the analysis of stability is therefore whether there is a risk of house prices falling sharply and thereby eroding the security value underlying loans to households. security value is of no consequence as long as borrowers can service and repay their loans but if a household becomes unable to pay, it is important that the value