Tighter mortgage underwriting standards proposed by Norway’s FSA are credit positive for Norwegian covered bonds and banks, Moody’s said yesterday (Monday), highlighting a cap on loan-to-income ratio limits and lower LTV ratios.

Systemic risks in Sweden’s mortgage market are increasing, Fitch said on Wednesday, adding that any disruptions could hit the wider banking sector, although it noted that banks are mitigating the risks while households have good debt servicing capabilities and rated banks are strongly capitalised.

A move by Finnish banks to allow households amortisation-free periods on their mortgages free of charge is a short term boon for Finland’s economy, but could pose a long term risk to the banking system, Moody’s warned on Monday.

New Swedish mortgages originated from August must be amortised down to a LTV of 50%, under new regulation unveiled by the Swedish FSA that will be credit positive for Swedish cover pools, according to an analyst.

Concentrated exposure to domestic real estate is a key risk factor and a negative driver of Swedish bank ratings, Scope Ratings said yesterday (Thursday), warning that the Swedish property market is overvalued by 20%-30%.

Swedish FSA proposals that new mortgage loans be amortised down to 50% of a property’s value according to a specified schedule would be credit positive for banks and covered bonds, according to Moody’s, but an industry representative suggested that implementation will be difficult.

The Swedish FSA suggested increasing the risk weight floor for mortgages from 15% to 25% upon releasing its latest report on risks in the financial system today (Thursday), citing a very high level of household debt in Swedish households.