Swedish $370bn home-loan market gets ‘mortgage fund’

epa06326836 (FILE) - A file photo dated 16 March 2013 showing the old town, 'Gamla Stan', in Stockholm, Sweden, with the German Church at center and the Royal Palace on background, as seen from Soedermalm suburb. Scandinavian media report 13 November 2017 state Sweden's finance regulator Finansinspektionen has suggested Swedish households that have taken large mortgages for their housing should start paying them back at rate that is one per cent higher than the current rate. Finansinspektionen suggests mortgages that are more than 4,5 times higher than gross income should be paid back at a higher rate as of from March 2018. The regulation still needs approval from Swedish government. The new regulation may hit hardest mortgage owners in Stockholm where average price for one sq m has reached almost 10,000 euro. Reports state real estate agents estimate housing prices in Stockholm have seen a 10-15 per cent decline since summer 2017. EPA-EFE/MAURITZ ANTIN

Bloomberg

As investors wonder whether Sweden’s housing market is headed for a correction, the country’s first mortgage fund is about to enter the $370 billion Swedish home-loan industry.
Stabelo plans to pool capital from Swedish institutional investors in exchange for fixed-income securities. That money will then be lent to home buyers. The fund starts offering its products this week and will work with Avanza Bank AB, Sweden’s largest online lender. Avanza, which owns just below 20 percent of Stabelo, will handle distribution and marketing.
The new fund will hit a market that is showing signs of having reached a tipping point. After years of rapid growth, fuelled by record-low rates and a shortage of homes, prices have started to fall. But with strict lending criteria, Stabelo says it isn’t too worried.
“This is the right time to be a conservative mortgage lender,” Hampus Broden, one of Stabelo’s three co-founders, said.
“In a market where mortgages are not primarily priced according to risk but on cross-selling opportunities, the best risk-adjusted return is found in the most conservative part of the market,” he said.
Stabelo plans to compete on mortgage rates. According to a statement from Avanza, the home loan offers a pre-approved rate, which for a 3-month term is 1.29 percent. That’s lower than the average bank rate of 1.57 percent, according to Avanza. The new home loan is available to customers with a loan-to-value ratio of a maximum of 60 percent, which Avanza says applies to more than half of Sweden’s total mortgage volume.
“The pricing looks competitive, with a fixed price for all clients at 1.29 percent for three-month variable rate loans, which is 25 basis points below the lowest average negotiated rate from any of the large banks in October for 3-month loans,” DNB ASA said. “We believe non-bank lenders like Stabelo will add competitive threat to the large banks, which coupled with lower volume growth ahead will lead to margin pressure in Swedish mortgage lending.”

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