22.11.201705:22:00UTC+00Riksbank Says Rising Household Indebtedness Greatest Risk To Economy

High and rising household indebtedness poses the greatest risk to the Swedish economy, Riksbank said in its Financial Stability Report, on Wednesday.

The bank observed the need for a stricter amortisation requirement and also for measures in housing and tax policies to increase the resilience of the household sector.

In addition to housing policies, tax reforms are needed to reduce the willingness and capacity of households to take on debt, the bank said.

Higher housing prices have contributed to a rapid rise in household borrowing. The central bank expects house prices to continue to increase in the next few years, but at a slower rate as the supply of housing increases and mortgage rates are expected to rise.

A slower rate of price increase for housing is positive, the bank noted.

Further, Riksbank noted that the exposure of the banking system to the property market makes it vulnerable. The exposure makes the banks sensitive to larger falls in housing prices.