The chief of the Swedish bank Riksbank wants there to be harder rules for people to pay down their mortgages. This move is in response to what he calls the “eternal duration” it is taking Swedes to pay down their mortgages over time and is fueled by rising worries over household debt and bankruptcy in the country.
Mortgages and Debt Rising
The rising rate of household debt and bankruptcy in Sweden, and around the world, fueled this push for greater regulation in the world of mortgages. Mr. Ingves, head of the Riksbank, went on to mention that banks should require borrowers to pay down, instead of government intervention, but the situation is becoming so important that he’d accept a governmental push on the idea.
Without a greater focus on paying mortgages, sectors of the economy, such as fuel borrowing, might be affected. In addition, there’s concern that homeowners unable to pay mortgages might be forced out of their homes due to bankruptcy or foreclosure. If these situations aren’t addressed, it’s possible that the Swedish issue could actually affect the world economy.
Paying down a mortgage has generally been a long-term concept, with monthly payments sent in month-after-month, but the increase in home lending – loans made by banks to help pay down these mortgages – have balanced out the practicality of such a plan. Add in the increasingly risky state of many loans with the damaged economy, plus the increasing rate of bankruptcy, and the credit-based solutions to mortgage concerns are getting less practical.