7 [13]  Figure 7. Households have increasingly high debt and shorter interest-rate fixation periods Household indebtedness has increased  Shorter interest-rate fixation periods for household mortgages 100  100  80  80  60  60  40  40  20  20  0  98  01  04  07 Variable  10  13  16  0  Fixed  Note. Left-hand graph. Percentage of disposable income. Total household debt as a share of their disposable income, totalled over the past four quarters. Right-hand graph. Percentage of mortgages. Refers to loans from mortgage institutions. Percentage of mortgages in each category is calculated based on the value of the loans. Variable rate refers to interest-rate fixation periods up to and including three months. Fixed rate refers to interest-rate fixation periods over three months. Sources: The Riksbank and Statistics Sweden  Most households can continue to pay their mortgages even at significantly higher interest rates ... The question is whether households’ interest-rate sensitivity – in combination with rising interest rates – might result in them quite simply not being able to meet their interest payments. This could lead to banks incurring direct credit losses on their mortgages, which in turn might affect financial stability. But I am not overly worried about this risk. Banks do what is known as a “left-tolive-on” or “discretionary income” calculation, as part of their credit assessment. As a rule, they don’t grant mortgages if there is a deficit in the calculation.
This has been as a result of Government’s sound macroeconomic management and the critical contributions that various sectors of the economy have made, of which the insurance sector is a part. Let me once again thank you for inviting me to share my thoughts with you on the role that your noble profession plays in this economy. On our part as Bank of Zambia, we shall keep on facilitating the development of, among others, the insurance sector by continuing to improve macroeconomic conditions that are critical to the expansion of your businesses. In turn, it is expected that other sectors of the economy will benefit and contribute to accelerated economic growth and development that the country is craving so much for in order to reduce poverty. May I, at this juncture, point out that in order to facilitate your work, you may track some of the developments in our economy on the Bank of Zambia website, which you can visit on www.boz.zm. You can also contact us directly for any information you may require on the economy. I thank you for your attention. BIS Review 72/2006  3