Sifi warns amortisation rules could hit consumption
The Swedish Investment Fund Association has warned that tougher amortisation rules from the country’s financial services regulator Finansinspektionen could lead to a slump in consumption as borrowers cut back on their spending.
The Assocation’s view comes in response to FI’s “Proposal for new rules on requirements for amortising property loans”, which have been developed by the regulator to reduce systemic risk from a slump in consumption linked to any future downturn in the economy.
However, the Association said that it “fears that it could have the opposite effect”.
“Having a low level of borrowing against the property, at the same time as accessible savings capital is lacking, does not result in the security that FI is seeking for households in preparation for a downturn. The Association’s view is that amortisation and savings should be discussed together.”
It is not the case that the Association is against amortisation per se: it sees the amortisation of loans as a good thing, but it is against individuals being forced to save because, it says, it fears that such rules hit the wrong groups. It also points to FI’s own data suggesting that voluntary amortisation payments have increased significantly.
Implementing tougher amortisation requirements would, for example, make it harder for households to access their first property, make it more difficult for growing households to access larger properties, and make it more difficult for older people to access more suitable property, the Association argues.