Swedish home prices to fall 15% from peak

Bloomberg

Swedish housing prices will continue falling until the middle of next year as the share of household income that goes towards mortgage interest payments is set to double, economists at the Nordic region’s largest bank said in a new forecast.
Nordea Bank Abp now expects prices to drop 15% from a peak earlier this year, which is larger than the 10% slump it had previously projected.
The deterioration comes as Swedish central bank is trying to put a lid on inflation by raising interest rates. Nordea expects the policy rate to be at 2% by the end of the year, which would take household interest payments’ share of disposable income to almost 8%, from less than 4% before the Riksbank started hiking rates earlier this year.
“Households are adjusting to rising expenses, and the rise in interest rates is not over yet,” macro economist Gustav Helgesson said in the bank’s research note. “Near-term, the slump is expected to slow down somewhat, but it will gather new pace as the Riksbank hikes its policy rate in September and November.”