As I said at the start, developments in the real economy and developments on the financial markets are interlinked and problems with financial stability thus risk having a negative effect on growth in the real economy. Problems on the housing and mortgage markets thus risk intensifying an economic slowdown by means of the financial markets and resulting in rising unemployment. As such a situation would affect demand in the economy, and thereby monetary policy, we cannot close our eyes to the risks linked to high household indebtedness. This is the case even though the Riksbank has limited opportunities to do anything about the underlying factors that are pushing up household debt. Many people believe that macroprudential policy, which is now becoming established in Sweden, will resolve the problems of high household indebtedness all on its own. I do not think it is that simple. I believe that macroprudential policy is at present only able to alleviate the problems by increasing the banks’ resilience to these risks and hopefully also dampening the indebtedness to some extent. What do we need to do to obtain a better balance in the long run and to attain a development that is sustainable in the long run? I believe that we need input from several areas. In recent years, a number of measures have been taken to dampen household indebtedness. For instance, Finansinspektionen (the Swedish Financial Supervisory Authority) has introduced a mortgage ceiling that limits how much a household can borrow in relation to the value of the property.
I would say that market confidence is essential for the stability of the financial system. 1  The Riksbank usually discusses household indebtedness from a financial stability perspective in its twiceyearly Financial Stability Report. See, for instance, Financial Stability Report 2013:2. Sveriges Riksbank. 2  Previously, mortgages were often financed through housing bonds, which had maturities of around 30 years. Today, covered bonds are used instead, where newly issued covered bonds had an average maturity of around 4 years in the autumn of 2013. At that time, the average maturity of the outstanding covered bonds was approximately 3 years. BIS central bankers’ speeches  1  We saw in the most recent financial crisis that high indebtedness in the household sector can create problems, with some countries suffering a severe fall in house prices. When the value of houses declines, households begin to save more. When savings increase, consumption decreases and thus demand in the economy falls. Ultimately, this can lead to lower production and higher unemployment. We do not want to see this kind of development in Sweden. It is also important to remember that there is interplay between developments in the financial markets and developments in the real economy. If we were to experience a fall in housing prices during a recession and thus similar problems to those experienced by other countries, it is likely that we would suffer both a decline in demand in the economy and that the banks would experience greater difficulty and greater cost in obtaining market funding.