Erik Thedéen: High debt and short interest-rate fixation periods make Swedish households vulnerable
Speech “Swedish households were hit harder by the period of high inflation than households in many other countries. However, now that inflation is close to the target again and real wages are rising, the conditions are favourable for a stable increase in both purchasing power and consumption.” These comments were made by Governor Erik Thedéen, speaking today at the Stockholm Chamber of Commerce on the lessons learnt from the development of consumption in recent years and the links to the housing market.
Date: 16/01/2026 08:30
Speaker: Governor Erik Thedéen
Place: Stockholm Chamber of Commerce
Erik Thedéen, governor.
Real household disposable income and consumption were hit harder in Sweden than in many other countries during the years of high inflation. “Our economic development normally follows that of the rest of the world very closely. Therefore, episodes where developments have deviated from those in the rest of the world are particularly interesting and important to understand.”
The weaker development of consumption in Sweden was partly due to slower growth in household labour income and a greater erosion of purchasing power here than in many other countries. “Prices of what households consume rose more in Sweden, partly as a result of the sharp depreciation of the krona in 2022 and 2023. Another explanation is the development of the housing market," said Mr Thedéen.
Swedish households, which on average have large mortgages with short interest rate fixation periods, have seen their interest costs rise more than in other countries. At the same time, house prices have fallen and residential investment has dropped sharply.
“The fact that we in Sweden deviate with large debts and such a high proportion of variable loans is not optimal and constitutes a vulnerability in the economy. Reality can change rapidly. That is why it is so important that we retain clear regulations and standards for household indebtedness and safeguard the amortisation culture that is now beginning to take hold.”
“Rising inflation and the subsequent rise in interest rates have been a major test for the Swedish economy and for individual households,” Mr Thedéen pointed out.
"This has shown the value of having buffers, at the government level where rising interest costs did not jeopardise the stability of public finances, and at the household level where indebtedness had to be prepared for rising interest rates and a weaker economy.”
Furthermore, the credibility of the inflation target has been clear and important. Not least, responsible social partners took the inflation target of 2 per cent as their starting point in wage formation, despite inflation rising to over 10 per cent in the short term. “This has cost households purchasing power in the short term, but it is something that will benefit the Swedish economy and Swedish wage earners in the long term. The credibility of the inflation target contributes to stability and predictability and paves the way for rising real wages in the coming years”, concluded Mr Thedéen.