Sweden: Debt dominance – Nordea Markets

According to analysts at Nordea Markets, elevated interest rate sensitivity of household balance sheets makes for a vulnerable Swedish economy.

Key Quotes

“High indebtedness complicates the Riksbank’s forthcoming hiking decisions, especially as the business cycle has peaked.”

“Household indebtedness and interest rate sensitivity are at unprecedented levels in Sweden, which means that an interest rate hike of a given magnitude would likely have a larger impact on house prices and domestic demand than before.”

“Even moderate Riksbank rate hikes would lead to historically elevated debt service ratios. The Riksbank’s own projections of the future interest rate would suggest that debt service burdens would increase to about 7%, a level that has only been surpassed once during the past 20 years.”