At present, around 40% of Swedes are repaying their mortgage loans. This is a figure that and even the government are not happy with. Therefore, you look at different solutions.
Both the Good Finance and the Good Lender Financial Authority investigate this independently. It should be clearly interesting and see what they come up with. For example, it may be that they reduce the repayment period on the loans as it is currently 50 years on average. Comparing you to some other countries in our vicinity is a long time. Finland amortizes at 30 years and this is a compulsion where amortization is to take place, Germany, Italy, Spain and France have an amortization period of normally 20 – 30 years. Of course, the Norwegians should be the worst when they are amortized there on average 22 – 23.
Increased costs by several thousand
Lowering the amortization length is an interesting solution, although it obviously brings with it some concerns. New borrowers are not the big concern, since they simply cannot pass a credit check if they do not have the extra money required for the increased repayment. The big problem is, instead, those who already have loans and live on small margins. After all, the mistake has been to lend them too much money before, and if you put on a requirement that can mean increased costs by several thousand USD per month, this will probably be a problem.
This is one thing that one must consider. The fact that I do not think there is such a big problem with new borrowers has with the fact that I do not consider it a right to live right where you want. Certainly young people can have problems, etc. when they do not have the economy that is currently required, but isf you have to settle for another accommodation. The problem is probably the biggest in Stockholm where it is expensive to live and you have to search further afield to get the prices down. But if you want to live in Stockholm, this is something that must be accepted if you do not have enough money.
It may be unfair to those who have less money, but the option of lending too much to people is not an option. After all, it’s like inviting to future financial problems.
We count on that
For example, a mortgage loan of 2 million can be used. If this loan is to be repaid at 30, USD 5,560 must be paid each month in repayment. If the interest rate is at 2% as it does now, it will also be paid USD 2,330 in interest after the interest deduction has been included. Thus, a total of USD 7,890 is to be paid each month where most of it is amortization which is not a cost really but a saving. The return on this savings is what interest costs will fall with.
If the loan had been repaid for 10 years, it would have fallen to 1.3 million and the interest expense would have dropped to USD 1,550 per month. Which is therefore USD 780 a month less in costs which is quite a lot of money. Anyone who does not repay had thus always had to pay the starting amount in interest, but then the amortization had failed.
Spending more money each month
Now that interest rates are so low it may not sound so dangerous but if you look a little at what it will be like if interest rates go up to 5%, the figures will be a little different. 5% which is fully reasonable to expect within this time period. A family that has not paid off may pay USD 5,830 after interest deductions each month, those who have paid off may pay USD 3,790 each month. Thus USD 2,040 less each month in interest. Of course, they will still be spending more money each month when they do, but the big thing is that they are very likely to be in a much better situation overall. After all, they have USD 700,000 less in loans on their housing, which makes a big difference.
Requirements for repayment are, I think, quite obvious to new borrowers. When I took my home loan myself, I never had any thoughts about not repaying. The question is how to deal with the existing mortgages as this can cause real problems. Perhaps the answer is that you go through all the loans manually and make demands on them where possible, and then try to find solutions for how those who are unable to pay off quickly can also pay off in the long run. Maybe they can start with USD 1,000 a month or whatever, only that you get started with an amortization that can then be increased over time.