On April 1, the mortgage ceiling rises to 90 percent, but additional loans after purchase are capped at 80 percent of the home's value. Two housing economists warn that this affects young people, low-income earners, and families needing to renovate their homes. The rules risk creating discrimination and delaying necessary maintenance.
The government is introducing new mortgage rules to counter overconsumption and prevent households from using homes as collateral for purchases like cars. Under the proposal, the general mortgage ceiling increases from 85 to 90 percent for home purchases on April 1. However, additional loans after purchase are limited to a maximum of 80 percent of the home's value, and revaluation due to price increases can only occur after five years, unless a significant change happens.
The experts note that there is no empirical evidence that Swedes extensively use homes as security for pure consumption. Instead, unsecured credits often lead to financial troubles. The new rules may force households needing renovations to take more expensive unsecured loans or amortize existing loans for several years before additional mortgages are possible.
An example illustrates the impact: Two equivalent households buy identical houses. Household A pays 6 million SEK for one in top condition and borrows 5.4 million. Household B pays 5.8 million for one requiring a 200,000 SEK roof renovation and borrows 5.22 million. To finance the renovation with a mortgage, Household B must amortize down to 4.44 million SEK, a reduction of 780,000 SEK, which takes 7.5 years at 2 percent amortization. This creates unfair treatment based on renovation needs.
The rules primarily affect low-capital households, such as young families and those with immigrant backgrounds, and may delay maintenance with risks of damage. They also hinder energy efficiency measures under EU directives and the purpose of the ROT deduction, negatively impacting the construction sector. An alternative is to allow conversion of unsecured loans for renovations to mortgages up to 90 percent against receipts, reducing the adverse effects.