Last fall, Good Finance blogged that the requirements for sms lenders would probably be tightened in 2016 as the government commissioned an investigation to look at how to tighten the rules.
There was talk of a possible interest rate ceiling for sms loans that would set the bar for how high the effective interest rate might be, a cost cap that would mean that interest costs could never exceed the size of the loan and it was talked about that it would be mandatory with written agreements.
State investigations are taking their time
So far, we have not seen the smoke of any such measures but as everyone knows, state investigations are taking their time and it is quite possible that new rules will be introduced later this year or Jan 1, 2017 instead.
However, if you do not just look at the rules for lenders offering sms loans, some things are starting to happen, at least when it comes to mortgages.
As you probably know, Goodbank (FI) had intended to introduce an amortization requirement for mortgages as early as August 1, 2015, but encountered a patrol at the Jönköping District Court. The Court of Appeal considered that FI exceeded its powers and that an amortization requirement would have too much negative consequences for lots of borrowers. FI then withdrew its proposal, but now the amortization requirement is again underway .
This is what the new amortization requirement looks like
On December 18, 2015, the Swedish Financial Supervisory Authority announced that they had sent out a new proposal on the amortization requirement on a referral, which is expected to be passed through Parliament on May 1, and if it does, the new amortization requirements will start to apply from June 1, 2016.
However, the proposal is very similar to what Goodbank submitted about 1 year ago and this is what it looks like:
- The repayment requirement should only apply to new mortgages taken from 1 June 2016. If you already have a mortgage and plan to stay in your home, you are therefore not affected.
- Anyone who takes out a mortgage to pay for a newly produced home is not covered by the new amortization requirement.
- If you change your bank and do not raise your loan, you will also not be covered by the new rules, unless the original loan is taken before 1 June.
- If you take out a home loan after June 1 and do not buy a newly-manufactured home and have a loan-to-value ratio exceeding 70%, the loan should be repaid by 2% of the original amount each year to the loan-to-value ratio below 70%, then you will repay 1% of the original amount each year until the loan-to-value ratio is less than 50%.
- If you take out a mortgage that is less than 50% of the value of the home, you do not need to repay at all.
- An assessment of the home is done every 5 years so that the bank knows what your actual loan-to-value ratio looks like.
Nothing new under the sun
When it comes to the new rules on sms loans, but prospective homeowners can be affected even more when it comes to loans. Since it seems very likely that the rules will be introduced, you who are thinking of buying a home next year (and you who are thinking of changing a home) may need to hurry up a bit, at least if you need to borrow more than 50 or 70% of the value of the home and cannot afford to repay any 1 or 2%.