Swedish LTV cap ‘still working’

A mortgage cap introduced in Sweden in 2010 is “still working” and a recent trend of rising LTV ratios has been broken, the country’s Financial Supervisory Authority said today (Thursday), citing results of an annual mortgage survey.

In 2010 the Swedish FSA (Finansinspektion) introduced guidelines limiting mortgages to a maximum loan-to-value (LTV) ratio of 85% and it today said that the cap is having the desired effect.

“The number of households taking loans that have a loan-to-value ratio above 85 per cent is still small,” it said. “Only one out of 10 households is taking an unsecured loan, and all of these households amortise.”

The conclusions are based on the results of an annual mortgage survey carried out by the FSA, which this year focussed on the use of unsecured loans and is based on information provided by Sweden’s eight largest banks.

The mortgage survey shows that “the trend in recent years of rising loan-to-value ratios has been broken,” said the FSA, and confirms that the mortgage cap is “still working”.

Few households are taking loans above the 85% cap (11% of households in the sample), according to the FSA, while amortisation has improved among households taking large loans. Households with loans in excess of the cap amortise and a “notable” nine out of 10 households amortise loans that are above a 75% LTV, it said.

However, it said that few households with mortgages above a 75% LTV are willing to amortise, and that this is an important long term issue that it will monitor closely.