The Riksbank is seen: “The risk is that you crack the housing market”


“Sweden stands out”, states Annika Winsth when Nordea NDA SE -0.20% Dagens utveckling presents a recent economic report for the Nordic countries.It is about home-produced risks, which, according to Winsth, stem from all the years with far too low key interest rates and support purchases that depressed market interest rates despite good times. This has fueled indebtedness among both households and companies and inflated prices on the housing market. “This means that Swedish households are very sensitive to interest rates,” she says. just over six months) it hits our wallets quite quickly – faster than in other countries,” she adds. The Riksbank’s “extremely expansive monetary policy” has at the same time eroded the value of the krona, which means that inflation will now probably be a little higher and more troublesome in Sweden than in other countries, according to Winsth. “Now the Riksbank has found itself in a dilemma. On the one hand, you need to defend the krona, so as not to import more inflation. But then the risk is that you will instead crack the housing market. Other countries don’t have that dilemma,” she says. The main scenario among Nordea’s economists is that the Riksbank will now raise the key interest rate by 50 points (0.50 percentage points) in February and a further 25 points in April – to an interest rate peak of 3.25 percent. About mortgage rates hanging on upwards means a cost increase of almost SEK 1,900 per month before interest deduction for a household with a mortgage of three million kroner.”Unfortunately, the risk is on the upside. It cannot be ruled out that the Riksbank will raise even more,” says Winsth. She singles out the interest rate announcements from the European Central Bank (ECB) as decisive for how it ends. “We are very affected by what the ECB is doing now because we have found ourselves in this situation with the krona,” says Winsth.In short term doesn’t she think the new Riksbank Governor Erik Thedéen, who took over from Stefan Ingves at the turn of the year, has a lot of leeway to influence the situation.”He needs to deal with what he has been given on the desk.” more humble about the inflation target.”The Riksbank has been far too fixated on the sacredness of the inflation target.””More humility is needed because this tool can actually hurt us – and I think it has. People have been staring too blindly at it and now we have to pay the bill for it. That should be taken into the future.”For households, the situation that has now been created is and will be tough, with a sharp downward correction for housing prices, falling real wages and interest costs that will soon eat up almost 10 percent of disposable income. Added to this are higher prices for electricity, fuel and food. A small glimmer of light can be sensed in the autumn, she believes. “Our assessment is that we will have a turnaround in the housing market sometime in September. Then we know what the money will cost. By then, the Riksbank has probably raised the rate and then perhaps they should rather start signaling that they can start lowering the interest rate at the beginning of next year,” she says. “Then you can enter the housing market again. Then you can start to feel that now maybe the worst is behind us.”The new normal however, after the inflation shock, it will not be the same as before, according to Winsth. Interest costs are expected to park at a slightly higher level for a while. And although the peak of inflation may already have been passed in a technical sense, prices will not fall to the levels before the pandemic effects and the Ukraine war. “If inflation falls, it does not mean that prices will fall. This means that they do not rise as quickly,” says Winsth. “It will be more expensive to live in the future as well,” she adds.

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