Sweden’s Social Democratic Party, which polls show will probably oust the government of Prime Minister Fredrik Reinfeldt next month, wants to use the state’s mortgage lender as a lever to lower the cost of home finance.
State-backed SBAB will be incorporated into Social Democratic plans to make housing more affordable, Magdalena Andersson, the party’s economic spokeswoman, said today in an interview after holding a press conference in Stockholm.
“Absolutely, I think we should use SBAB as a player in the market to put pressure on the big banks,” Andersson said. “Many big banks have wide margins, and it’s then important that we have proper competition in the market.”
A graduate from the Stockholm School of Economics who also attended Harvard, Andersson has used the election campaign to
unveil her party’s goal of supporting the housing market through targeted measures including increased construction. The plan may threaten the dominance of Sweden’s four biggest banks, Svenska Handelsbanken AB (SHBA), Swedbank AB, Nordea Bank AB (NDA) and SEB AB. It also risks colliding with warnings from the central bank, which has cautioned against fanning Sweden’s credit and housing markets.
Swedes, who polls show have grown weary of government tax cuts they fear have eroded their welfare base, look set to vote in a Social Democrat-led coalition promising more spending on job creation. Opposition leader Stefan Loefven said last week jobs are more important than the fiscal restraint needed to reach a budget surplus.
Record Debt
The Social Democrats would together with the Green Party and the Left Party get 48.8 percent of votes if an election were held today, according to the average result of five different polls carried out in August and compiled by Novus. Reinfeldt’s four-party coalition would win 37.6 percent.Andersson earlier this month drew criticism from Finance Minister Anders Borg after revealing her party may seek to relax a mortgage cap in place since 2010 if Sweden introduces forced amortization for mortgages. Failure to find a policy mix that addresses Sweden’s record consumer debt burden could trigger a monetary policy reaction. The central bank has signaled it will tighten policy if the government and regulator don’t do enough to rein in debt.
Yet even the central bank may come under scrutiny under a Social Democrat-led government after the party questioned the fallout of its policies on unemployment. Others, including Nobel Laureate Paul Krugman, have also faulted the bank for its focus on debt while the country sank into a disinflationary spiral.
Saving Jobs
“We have been clear with this,” Andersson said. “We think it is suitable to do a larger review where adjustments can be proposed. This needs to be across blocs and done in a parliamentary committee. The Social Democrats will push to make the part of the Riksbank’s work that is to take employment into account stronger than today.”Andersson blames a housing shortage for the nation’s rising property prices and debt burdens. To address this, the Social Democrats say they want to inject 3 billion kronor ($429 million) into SBAB and use that to finance construction of both rental and owner-occupied homes. SBAB on Aug. 28 said it had shelved a planned product expansion to focus instead on its mortgage and residential financing business.
That followed the ousting of Carl-Viggo Oestlund as SBAB’s chief executive officer in January after less than two years into the job. He was fired after costs tied to the product expansion increased at a faster pace than expected. Sweden created SBAB in 1985 and in 1991 the lender started to compete with commercial banks for mortgages, according to its website.
SBAB had a market share of 7.3 percent of Swedish mortgages in the second quarter, unchanged from the first three months of the year.
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