Covered bond purchases had some effect on mortgage rates
Economic Commentaries, News The Riksbank’s purchases of covered bonds during the coronavirus pandemic contributed to a fall in mortgage rates. The purchases had the fastest and largest effect on mortgage rates with a fixation period of between one and two years. These are the conclusions of Robert Emanuelsson, Erik O Andersson and Tamás Vasi in a new Economic Commentary.
The Riksbank implemented a large number of measures in 2020 to alleviate the economic effects of the coronavirus pandemic and to support the Swedish economy. In this Economic Commentary, the authors have conducted an event study to examine whether and how the Riksbank's purchases of covered bonds affected Swedish mortgage rates. The authors emphasise that it is difficult to separate the impact of the Riksbank's actions from other measures implemented at approximately the same time. However, the results indicate that the Riksbank's covered bond purchases contributed to a fall in mortgage rates, but that it takes at least six months for this to happen. The purchases had the fastest and largest effect on mortgage rates with a fixation period of between one and two years. The effect on variable mortgage rates occurs somewhat later and is weaker.
Authors: Robert Emanuelsson, Erik O Andersson and Tamás Vasi - currently or previously working at the Financial Stability Department