Trend for high mortgage broken Photo: Scanpix

Mortgage cap is working: Financial Authority

Sweden’s Financial Supervisory Authority (FI) reports in a press release on Thursday that the trend in recent years of rising loan-to-value ratios on homes has been broken. FI says only 11 percent of home lenders are taking out high-interest loans to cover their down payments instead of using their savings.

The mortgage cap, set at 85 percent of a property's value, was introduced in 2009 as a way of encouraging to save more money and borrow less.

In its annual assessment for 2012, FI reports that fewer households are taking loans above the cap, while households taking large loans are getting better at reducing the size of their loans by paying money back to banks.

However, only four out of ten households who have taken out loans below 75 per cent of the property pay back on, or amortize, their loans, and they are doing so at a slow rate.

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