In addition to increasing the resilience of the banking system, higher capital adequacy requirements could also contribute to slowing down household indebtedness as the banks’ funding would become more expensive if they had to have more capital, which could lead to higher lending rates and reduced credit granting. However, further capital requirements of the magnitude now being discussed would have only relatively marginal effects on household indebtedness.10 At the same time, both household debt and housing prices are continuing to increase from already high levels, despite the fact that Finansinspektionen introduced a mortgage cap already in 2010. I therefore feel that further measures are needed to subdue household demand for credit. The Riksbank has proposed, for instance, the introduction of healthy minimum levels for the standard values used by the banks in their discretionary income calculations, which form part of their credit assessment of households. This means that a borrower should be able to manage certain minimum levels with regard to interest rate, amortisation rate on both first and last mortgages, as well as maintenance and general living costs. Examples of further measures that might have an effect on indebtedness are amortisation requirements, limits to loan amounts or interest payments in relation to income or a stricter mortgage cap. The question of measures to increase households’ amortisation of their loans was discussed by the Financial Stability Council in May.
The upper half illustrates the effect of the repo rate on inflation and resource utilisation during the forecast period, and the lower half illustrates the effect of the repo rate on indebtedness and risk in the longer run.6 In the situation we have had in recent years – with inflation undershooting the target – a lower repo rate and repo-rate path has typically meant that inflation will approach the target faster, but also that household indebtedness – and thereby the risks in the longer run – will increase more. Our most recent assessment assumes that household indebtedness, measured as debt in relation to disposable income will increase from an already high level, and moreover increase somewhat faster than in the previous forecast (see Figure 9). At the same time, the percentage of loans at a variable rate is increasing. This is natural in a situation where the Riksbank is signalling that interest rates will be low for a long time. However, the combination of high indebtedness and a large percentage of variable-rate mortgages makes households more sensitive to changes in interest rates. The low inflation is motive for lower interest rates – indebtedness must mainly be managed within other policy areas As on so many previous occasions in recent years, the monetary policy balance in July concerned balancing the low inflation against the high household indebtedness and the risks this entails.