Overall assessment of macroprudential measures

Since 2010, FI has implemented a number of macroprudential measures aimed at increasing the resilience in the financial system and subduing the risks associated with high and rising household debt. These measures include tightening the capital requirements on banks and introducing a mortgage cap and two amortisation requirements. In this report, we present an overall assessment of these measures, with a focus on the measures that, via lenders, place restrictions on households’ mortgage borrowing.

FI's evaluation shows that the mortgage cap and the amortisation requirements in general have had the intended effects by mitigating the risks associated with mortgagors' debt.

The measures have helped subdue and prevent a scenario where new mortgagors borrow more and the percentage of households that are highly indebted grows rapidly. Without taking action, household debt – and home prices – would be even higher than they are today. The measures will also slow future growth of debt and home prices and prevent lenders from using high loan-to-value ratios and low amortisation as a means of competition.

The amortisation requirements have primarily decreased mortgagors' willingness to borrow money. There are limits for how much of their income households are willing to allocate to accommodation. But the measures have also decreased some households' possibilities for borrowing through the limitations of the mortgage cap or the requirements in lenders' credit assessments.

Buying a home today requires higher income, more equity, and larger debt service payments than before. This is due primarily to higher home prices, but FI's measures have also contributed to this development. Overall, the measures' impact on the functionality of the housing market are judged to be limited. They have primarily been temporary. Turnover increased prior to the measures' entry into force and fell slightly thereafter, but it has since returned to previous, and even higher, levels.

At the beginning of the coronavirus pandemic, FI expanded the possibility for lenders to grant exemptions from the amortisation requirements. The exemption opportunities have given households with large mortgages greater manoeuvrability during a period of exceptionally high uncertainty regarding economic development. Approximately one out of ten borrowers have used the exemption. For new lending, FI's evaluation indicates that the temporary exemption resulted in new mortgagors taking slightly larger mortgages and buying slightly more expensive homes. The expanded exemption will expire in August 2021 as planned.

It is also possible for banks to grant exemptions from the amortisation requirements for purchases of newly produced homes. The banks have allowed customers to use the exemption to some extent. In general, the contractual amortisation payments for buyers of newly produced homes are relatively similar to the payments observed among home buyers the years before the requirements were introduced. For buyers of newly produced homes, the amortisation payments have not been tightened in the same way as they have for buyers of existing homes.