Broken red line shows an estimate of developments over the next 10 years without further measures. Shaded area indicates a feasible lower limit for when the risks are elevated in the economy. Broken lines show an estimate of the effects of different measures. “Debt-to-income limit (400%, exemption 15%)” means that 15 per cent of the volume of new loans may have a loan-to-income ratio exceeding 400 per cent. Sources: Statistics Sweden and the Riksbank. I mentioned the debt-to-income limit earlier. A limit of 600 per cent in relation to disposable income would affect around 12 per cent of new mortgage borrowers. In Figure 13 we can see that the effect is considerably greater than it would be with the amortisation requirement, but also considerably smaller than with halved tax relief. If a debt-to-income limit of 400 per cent of income were introduced, for example, this would currently affect nearly 40 per cent of new mortgage borrowers. Indebtedness would thereby be dampened considerably in the long term, and we would also see a large amount of the effect within 10 years (see Figure 13). Our calculations indicate that the extent of the effect would be as great as if tax relief were halved. 20 Debt-to-income limits have already been introduced in the United Kingdom and Ireland.
Figure 9 Ownership of Swedish covered bonds by type of investor Shares in per cent 50  50  45  45  40  40  35  35  30  30  25  25  20  20  15  15  10  10  5  5  0  0 02  04  06  08  10  12  14  16  Swedish banks Swedish funds Svenska insurance companies Public sector including national pension funds Foreign investors  Source: Statistics Sweden. Indirect risks for financial stability and the macro economy An indirect risk, going from the macro economy to financial stability, is that reduced demand from over-indebted households will push the general level of demand in the economy down. This will weaken economic activity, in turn increasing the risks that the banks will incur loan losses in the corporate sector. 11 Earlier, I mentioned that the banks may have problems obtaining funding in the event of a fall in prices on the housing market in Sweden. In such a scenario, it is also conceivable that the banks’ funding problems will lead to higher lending rates to households – and thereby to lower consumer demand. In practice, it is likely that all of these direct and indirect factors will interact so that the consequences of a decline on the housing market may be serious and also difficult to gain an overview of in advance. 11  See Financial Stability Report 2015:1, pp. 13.