Loans with homes and other kinds of property as collateral make up about 80 per cent of the major banks’ loans to Swedish households and companies. Loans to households for mortgage purposes make up the very greatest part of this. This exposure has increased over the last decade. Therefore, as I have pointed out on a number of previous occasions, what has happened is that the major banks that are usually described as commercial banks, have, in fact, become ‘mortgage banks’. The increased lending depends, among other factors, on rapidly rising housing prices and historically low interest rates, but also on the number of households and completed homes having increased over the period. 11 The banks fund these mortgages to a high degree on the capital market, in particular with covered bonds, the collateral for which is made up of mortgages. As mortgages have grown, so have the volumes of covered bonds, some of which are issued in foreign currency. Developments on the housing market can thus also affect confidence in the banks and, in a bad situation, their funding could also become both more expensive and more difficult to obtain. The fact that the major banks also own one another’s covered bonds increases the risks still further. Housing policy benefits certain groups Apart from rising housing prices leading to increased indebtedness for households, there are also other aspects of the housing market that are problematic.
5 Today, I would like to discuss how we can balance today's challenges against tomorrow’s gains. In my opinion, we must adopt measures that can be seen as costly today to solve problems that could improve the housing market in the long term. And managing the problems on the housing market will require other/more measures than those falling within the framework of macroprudential policy. For the Riksbank, it is important to monitor the housing market: it is well documented by empirical studies that a rapid increase in debt increases the probability of financial crises and falling prices on the housing market. The economy can also become more sensitive to various shocks if households (and companies) are highly  4 See, for example, Bäckman, C, C Lutz (2018) and Cunliffe, J (2019). 5 See Finocchario et al. (2016). 2 [13]  indebted. The studies also show that, if the banking system has large exposures to the housing market, financial stability can be threatened. 6 In the Riksbank’s task of promoting financial stability 7, it is therefore important to ensure that the banks and their borrowers have resilience to shocks that could threaten financial stability. In addition, if financial stability should start to falter, there exists a risk that it would become more difficult to conduct monetary policy.