In a report on the Nordic countries the IMF warned that a drop in housing prices could lead to a financial crisis in the region. Swedish households are particularly indebted, according to the report, and tend to only repay the interest on mortgages, reports Swedish Radio News.
The IMF also recommends that the government remove tax breaks for home owners to cool down the housing market.
However Sweden’s Institute of Economic Research, which provides the government with economic forecasts, did not agree with the IMF criticism.
“We think there are many possible reasons behind rising house prices,” said the institute’s director Mats Dillén.
The trade union organization LO was also critical of the report, placing the blame for rising mortgage debt on a lack of available housing.
“Prices are rising naturally, because too few houses are being built,” said the group’s chief economist Ola Petersson.
Earlier this year Financial Markets Minister Peter Norman ruled out new legislation to cover the mortgage market, saying he preferred a voluntary system for the banks when dealing with new loans.