Not repaying housing loans…

A 30 year old Swedish coworker (in finance) in Stockholm bought a block of Apple shares in 2008 after selling his holdings of Nokia. Both investments enabled him to buy a nice apartment in Stockholm for SEK 6 million. His debt today is SEK 3 million and he and his sambo pay SEK 10 000 back every month because interest rates are so low. And they do this even though the bank was pushing investment products with a 40 year housing loan without the need to make repayments for 10 years.

The small bostadsrätt (22 apartments) of my former apartment in Tegnerlunden took a huge loan (SEK 24 million) in 1986 when it changed from being a hyresrätt to become a bostadsrätt. Almost 75% of the loan is still there because the 22 apartment owners do not think it is smart to repay the loan. The bank is happy to keep the loan almost as a perpetual loan. The bank has increased the margin twice! I sold the apartment when I came back to Helsinki 2 years ago. I cannot help wonder what will happen when interest rates go up again as they will in the not too distant future. I calculated that a 1% increase in interest rates means an increase in the monthly payment of SEK 15/m2. Not a small increase…

The housing market in Stockholm has seen an incredible increase in prices with a huge increase in really long-term loans for buyers. Consumption is wild in town there with restaurants and shops booming. Does the Protestant work ethic say something about all this?