Tightened mortgage repayment requirements
You are probably aware that different banks have different requirements when it comes to granting mortgages. This is hardly anything new. However, the requirements for customers who are looking for a mortgage will become increasingly stricter in 2018. This is because the Swedish Financial Supervisory Authority submitted proposals in the spring to tighten the repayment requirement. If the requirement for repayment is tightened, the demand for borrowers will also be tightened, as it will be increasingly difficult to meet the calculations the banks have for their mortgages.
However, what the new requirements will look like, we will not know until this autumn. The proposal that FI has submitted is on a referral until early September. Thereafter, the final proposal will be submitted to the government, which in turn will make the final decision.
Worried among potential home buyers
During the high summer, housing sales slow down significantly, but now as we approach the late summer and early autumn, the housing market is picking up again. As a result, there are more homes to choose from and more and more people are starting to become interested in home buying. However, a number of potential home buyers are concerned about the proposals to tighten the amortization requirement presented by the Swedish Financial Supervisory Authority during the spring.
Finansinspektionen simply wants the requirement regarding amortization to be tightened during next year, however, there is still no exact time for when this possible requirement will come into force. This creates some unease among the home buyers, which is not very strange. A new, stricter amortization requirement will make it more difficult to meet the calculations the banks have for their mortgages. It is expected that as many as 14% of those planning to take out a new mortgage will be affected by the new repayment requirement.
Here you can learn more about amortization.
New amortization requirement will look like
Finansinspektionen’s proposal regarding the new repayment requirement is that borrowers who have loans in excess of 4.5 times their pre-tax income should be forced to repay more than they currently do. This is what the proposal looks like:
- Mortgages in excess of 70% of the value of the home must be repaid by 3% per annum.
- Mortgages exceeding 50% of the value of the home must be amortized by 2% per annum.
- Mortgages that are less than 50% of the value of the home must be repaid by 1% per annum.