Mortgages were amortised to a greater extent a few decades ago, at the same time as inflation automatically reduced the real debt ratio. I believe that more amortisation may be needed, especially in the current situation with low and stable inflation. However, before the authorities impose amortisation requirements it may be worth reviewing other aspects of the provision of loans. One example may be how different amortisation alternatives are presented to the borrowers. Another may be to demand that the borrowers have the financial scope to amortise their loans at a certain rate. The important thing is to restore an amortisation culture so that the households’ margins are safeguarded and the economy is protected. The Riksbank focuses on these issues because we wish to safeguard the Swedish financial system. All our analysis and all our measures aim to reduce the risk of Sweden incurring major economic costs when the banking sector gets into trouble. As a complement, Sweden also needs to put a clear framework for macroprudential policy in place. The global financial crisis demonstrated the need to complement traditional financial supervision – micro supervision – which focuses on risks in individual institutions, with supervision that focuses on the risks in the financial system as a whole. In January, the Financial Crisis Commission presented an interim report which proposed how responsibility for macroprudential policy could be allocated in Sweden. We will therefore need to consider the Riksbank's stance on this issue.
Similarly, crises that are preceded by a credit and housing boom tend to be longer and more severe than other economic crises.1 A fall in housing prices may lead households to save rather than consume in order to compensate for the fact that the value of their homes has fallen. If many households behave in this way, this may weaken economic activity, increase unemployment and create loan losses in the banks' lending to companies. This, for example, is what has happened in our neighbouring country Denmark in recent years. What we can note is that the credit conditions for mortgages changed in the early 2000s. Interest-only mortgages became increasingly common at the same time as the loan-to-value ratios increased. The banks also began to fund mortgages by issuing so-called covered  1  See Claessens, S., A, Kose, and M, Terrones (2011), “Financial Cycles: What? How? When?”, IMF Working Paper. CEPR Discussion Paper, NO.8379. BIS central bankers’ speeches  3  bonds on the financial markets to an increasing extent. Easy access to inexpensive funding in combination with a high demand for mortgages led to rapid credit growth. Now, the debts of the Swedish households are high in both historical and international terms. Although the rate of credit growth has slowed down and loan-to-value ratios have fallen – the mortgage cap introduced in 2010 has probably contributed to this – there are still structural weaknesses on the Swedish mortgage market.