STOCKHOLM (Reuters) - Sweden may not need to pursue tougher regulation of mortgages if proposals from its banks achieve the desired effect of tightening controls on the burgeoning home loan sector, the country's financial watchdog said on Wednesday.
The issue of mortgage regulation is important for the Swedish economy given that household debt is among Europe's highest at more than 170 percent of disposable income, prompting the International Monetary Fund (IMF) to warn it poses a threat to economic stability.
Regulators have been looking at imposing tighter conditions on mortgages but the banks stepped in with their own proposals on Tuesday, a move which has won some support from the Swedish Financial Supervisory Authority (FSA).
"If they come up with something similar to what we ... are considering, then there is of course no reason for us to go in and do it the hard way," Martin Andersson, general director at the FSA, told Swedish Radio on Wednesday.
Andersson noted the FSA would want to be sure any self-regulation measures were followed up and complied with.
Regulators have been looking at tighter borrowing rules including limiting interest-only mortgages and speeding up repayments.
In response, the Swedish Banker's Association (SBA) set out its own proposals, including the idea that new borrowers should have to take out repayment as opposed to interest-only mortgages on all loans of more than 50 percent of the market value of a property.
The major Swedish banks such Handelsbanken
(Reporting by Johan Ahlander and Daniel Dickson; Editing by David Holmes)