The average debt ratio is then higher than 200 per cent in all of the income groups, and in fact highest in the lower income groups (see Chart 3). If we look at households instead, which may be reasonable considering that many borrowers in fact live in a household with more than one income earner and thus share responsibility for servicing the loan, the picture is till one of high debts in relation to incomes in all of the income groups. And here too it is clear that the highest debt ratios are mainly to be found among low and middle-income earners. Our results thus contradict the picture that it is only those with high incomes that have the highest debt ratios, that is those who are traditionally regarded as having a higher level of  BIS central bankers’ speeches  5  eduction, a stronger position on the labour market and wealth that they can draw from in difficult situations. Chart 3. Debt ratios in different income groups Per cent 800 700 600 500 400 300 200 100 0 1  2  3  All households (SOU)  4  5 6 7 Income deciles  Indebted individuals  8  9  10  Indebted households  Sources: SOU 2013:78 and the Riksbank  High debt ratios are not only a metropolitan phenomenon It may also be of interest to look at the geographical distribution. It has often been claimed in the debate in recent years that debts are mostly a “Stockholm problem”.
3  One explanation of this is that a household’s propensity to consume is affected by how highly indebted the household is. Studies have found that a highly-indebted household reduces its consumption more in a crisis than a lowly-indebted household. See, for example, Andersen, A.L., Duus, C. and Jensen, T.L. (2014), “Household debt and consumption during the financial crisis: Evidence from Danish micro data”, Working Paper, Danmarks Nationalbank and Mian, A. Rao, K. and Sufi, A. (2013), “Household Balance Sheets, Consumption, and the Economic Slump”, Quarterly Journal of Economics 128(4), pp. 1687–1726. 2  BIS central bankers’ speeches  total level of indebtedness. 4 I would also like to point out the difficulties that many individuals experience when bad times coincide with high private debts. An additional factor is that mortgage lending forms an important part of the Swedish banks’ assets, which means that the financial system is sensitive to risks linked with indebtedness. The banks fund as much as three-quarters of their lending for housing purposes on the market for covered bonds and access to funding on this market is based on Swedish and foreign investors being highly confident in the safety of the the underlying assets. If confidence wanes, funding costs may increase and access to funding may decline. This would disrupt the functioning of the financial system and thus have a direct negative effect on financial stability.