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UPDATE 1-Swedish FSA to propose new measures to slow mortgage debt growth
October 3, 2017 / 9:22 AM / in 17 days

UPDATE 1-Swedish FSA to propose new measures to slow mortgage debt growth

(Adds further FSA chief quotes, background)

STOCKHOLM, Oct 3 (Reuters) - Sweden’s financial watchdog will send a fresh proposal aimed at dampening the build-up of household debt to the government this autumn, Director General Erik Thedeen said on Tuesday.

Swedish housebuyers have piled on debt in recent years, taking advantage of strong income growth and ultra-low borrowing costs. This has led to warnings of a bubble that could threaten the economy in the longer term.

“We will send our proposal for a so-called debt brake to the government in autumn,” Thedeen said in a speech.

Thedeen said under the proposal, households that had borrowed more than 450 percent of their gross income - equivalent to around 6 times disposable income - would have to make higher mortgage payments.

Authorities have already introduced a loan-to-value ceiling - the amount you can borrow in relation to the value of the house - and tougher mortgage repayment rules.

But borrowing has barely slowed and house prices have sky-rocketed, sparking calls for more action.

Lending to households, already among the most indebted in the European Union, rose 7.1 percent on an annual basis in August.

Thedeen said that under current regulations the FSA could not introduce a cap on borrowing in relation to household income, but did not rule that out in future.

“This is kind of softer - it is not a roof, it is a kind of brake,” Thedeen said. The FSA will present its proposal to the government this autumn, he said.

He said that if the government’s plan to give the FSA wider powers next year comes to fruition, the watchdog would evaluate whether it needed to do more, possibly including a ceiling in terms of borrowing in relation to income as already exists in a number of countries.

“Then we will not exclude any measures, including a ceiling,” he said.

Reporting by Simon Johnson; Editing by Niklas Pollard and Raissa Kasolowsky

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