The Riksbank has collected data on thousands of individual households’ finances from Statistics Sweden for several years now. These statistics show that the households with the largest debts also have the highest incomes and the largest wealth. We have also examined what would happen to households’ ability to pay if unemployment or interest rates were to rise. The overall assessment is that households at present cannot cause loan losses to such an extent that the stability of the banking system would be threatened. However, even if the household sector’s ability to pay on the whole is good, there is of course a risk that individual households will borrow too much and may experience payment problems. With regard to financial stability, I see no serious risks in the growing household indebtedness and rising property prices. Are there any risks with regard to the inflation target? This question is slightly more difficult to answer. How developments in the asset markets, such as the housing market, will affect monetary policy for a central bank with an inflation target is a subject debated all over the world by academics and economic decision-makers. The problem can be formulated roughly as follows: The increases we have seen in household indebtedness are not sustainable in the long term; household debts cannot grow twice as fast as incomes over long periods of time.
House prices (index 1986=100) 600  500  400  300  200  100  National average  Greater Stockholm  Greater Göteborg  Greater Malmö  m ar -0 6  m ar -0 4 m ar -0 5  m ar -0 2 m ar -0 3  m ar -0 0 m ar -0 1  m ar -9 8 m ar -9 9  m ar -9 6 m ar -9 7  m ar -9 4 m ar -9 5  m ar -9 2 m ar -9 3  m ar -9 0 m ar -9 1  m ar -8 8 m ar -8 9  m ar -8 6 m ar -8 7  0  Source: Statistics Sweden  4.