The number of unsecured loans is increasing
The number of private individuals in Sweden taking out unsecured loans has reached its highest growth level in almost 10 years. Not since 2008 has such growth been seen on this type of loan. Experts believe that the reason for the increase is that more and more people are taking out consumer loans to meet the cash contribution when buying a home. In June, the growth rate for consumer loans was 9.4%, which is 1.1% more than the previous record in 2008, when it was 8.3%.
Consumer loans for housing
Consumer loans are basically another word for a private loan. They are therefore loans that you can use for whatever you want, such as travel, electronics and home decor. This type of loan also does not require any collateral such as mortgages. What private individuals do is that they use these loans, which in theory should be used for smaller purchases, to buy housing. Since they are unsecured loans, they have a relatively high effective interest rate compared to mortgages. Arturo Arques means this:
– “It would surprise me a lot if this increase can be explained by the fact that people buy more TV sets or travel. I would say that a great deal is due to the fact that it is borrowed for cash. “
The reason is tougher mortgage rules
To prevent private individuals and households from not over-lending themselves, Finansinspektionen introduced an increasingly restrained mortgage rules. What this means is that right now, mortgage loans must not exceed 85% of the value of the home. Many people are now not easily able to get through their mortgage requirements as the amortization rules have been tightened and housing prices have risen. Arques also believes that since the Swedish Financial Supervisory Authority wants to see even tougher amortization rules, buyers should be careful to buy housing before the rules are tightened further. In these cases, private loans such as consumer loans will then become very attractive.
– “The mortgage rules are there for a reason. If you cannot afford the cash contribution, you should look for a cheaper housing. ”
The minimum cash contribution lies with the current rules of 15% of the value of the home. If you are looking for a condominium in Stockholm municipality, you must be prepared to pay at least USD 2 million. With a loan ceiling of 85%, this means that you have to pay USD 300,000 in cash.
Home loans today have an interest rate of around 2.3%, you can always get better interest rates on home loans if you collect more loans with the bank and make sure you establish a personal contact, do not forget to bargain on interest rates. Under these rules, it is understandable that not everyone has 300,000 lying in their savings account. Many people therefore take consumer loans to cover the 15% required by the regulations.
It should also not be forgotten that if you mortgage 70% or more of the value of the apartment, you repay at least 2% per year of the loan amount. From 50% up to 70%, you repay at least 1% per year of the loan amount. If you borrow under 50%, the loan is amortization free.