nordic comparison

Concern about the mortgage levels in Sweden

Mortgage holders in Sweden pay off less on their loans than in any other Nordic nation, but the Swedish Financial Supervisory Authority (FI) has decided to drop the idea of forcing people to start paying off their loans. At least for now.

"We have to take small steps forward, it is not possible to change anything over night. We need a sustainable development," says Magnus Karlsson, head of analysis at FI, tells the news agency TT.

But the situation among mortgage holders in Sweden is worrying the FI as well as the government and IMF.

Today 43 percent of Swedish mortgage holders don't pay off their loans at all, which the IMF notes is "very low".

Nine out of ten Swedes follow the Swedish Bank Association's recommendation that people who have a mortgage of more than 75 percent of the value of the home should be paying off their loans. But among the households with a mortgage of less than three quarters of the value of their house, only four out of ten bother paying off their loans at all.

According to the financial authority FI, the people who have started paying off their loans, will need an average of 140 years to do so. This picture is also historically low for Sweden. Magnus Karlsson tells TT that Sweden needs to return to the culture of paying off loans that dominated here some 20-30 year ago.

"But things are a better than 5-7 years ago, when many took out mortgages to 95 percent of the value of their house, without any plan for paying it off," he says. These days, a ceiling stipulates, that no-one is allowed to take out a mortgage for more than 85 percent of the value of the property.

In Denmark mortgages have to be paid off after 30 years. In Finland the average time to pay off a new loan taken out during the period 2007-2012 was 17,9 years, while in Norway it was 21,6 years.