Swedish household continue to curb domestic debts as Debt Mountain starts falling


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Thursday, 25 August 2011   
Sweden had tow major problems hanging over its nicely performing economy – huge household debts and runaway real estate prices. Almost all viable economic institution had called on Sweden to reduce these debts and bring back the “over-valued” house prices to order. It seems something is beginning to happen in that direction.

Rate of lending to Swedish households continues to slow down. Step by step the risk of a lending bubble in the housing market gradually being attenuated.

Growth level of household debt fell to 6.4 percent annual rate in July, according to Statistics, Statistics. This compares with 6.6 percent in June and by 8.9 percent in July 2010.

Cooler lending means a cooling housing which may also see the Swedish house prices dropping aster that previously determined. Close to Skr2100 billion of Swedish household debt mountain of the Skr2600 billion is made up of housing loans.

The Swedish central bank, or the Riksbank as well as several analysts have pointed out that the high domestic Swedish debt rate needs to radically brought down to around 5 percent for the much-touted risk of a housing bubble to be minimized.

But households have begun in earnest to leave behind the hysterical loan party with growth rates of over 10 percent from 2005 to 2008, to a lower trend at the moment.
A lending rate for households of 5-6 percent means  the "sound is levelling off" of the house prices, according to the an assessment of the National institute of economic research  whereas Nordea believes that a "clear risk" of falling prices on households' appetite for loans will continue to slow at the current pace.

53 percent of the outstanding mortgages in July were taken at variable rates meaning the rates stand leading on the rapo rates changes. The gamble may pay off it the rapo rates remain unchanged or it starts falling if the economy starts loosing steam.
By Team

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