Home Loan Party May Soon Be Over

More and more Swedes are taking out home loans with short lock-up periods, something the National Housing Credit Guarantee Board (BKN) warns can lead to serious financial problems. Interest rates are at a record-low right now, but households with little buffer will start feeling the pinch when interest rates begin to rise again.

But loantakers won’t be the only ones affected, BKN cautions; the entire Swedish economy could go into decline if people put more money into loans, and less into consumption.

“We have a very nasty mix of floating interest and increasing indebtedness,” Bengt Hansson of BKN told Swedish Radio News.

BKN maintains that banks should begin offering more favourable conditions for loans with longer lock-up periods.

“Banks may have to make an effort to offer an alternative for the long-term with low, stable interest. If there are rules that limit this, the state has to change the legal framework,” Hansson said.