Abstract
Background and problem discussion: Over the past few years prices on housing have repeatedly hit the roof; in the news there have been reports about how there has, year after year, been a new all-time high for money spent on housing. The low interest rates are enabling people to afford large loans and hence to pay more for their housing. We would like to investigate what the market for home loans looks like and what rules the banks play by. We will focus on the market for home loans; nearly half of the banks lending today is to private persons and a great part of this sum goes to investment in real estate.
Aim of the study: The aim of this study is to investigate what role banks play concerning the elevation of prices on the private property market in the Gothenburg region.
Delimitations: The study is limited to look at the matter from a private person’s point of view and in the Gothenburg area. The study mainly focuses on the traditional banks, and has been limited to comprise only three of them.
Method: Data for the framework was collected to find out how the situation on the market for home loans, current regulation and the situation on the real estate market looks today. The aim was to find out how banks are supposed to act. Published information was searched in books, articles, theses and on the Internet. After this interviews with three different banks were carried out, in order to find out how the banks really act. The information found during the interviews is gathered in the empirical section and presented bank by bank.
Analysis and Conclusion: The information gathered in the framework and the empirical section was then analysed. We have made comparisons between the way the banks are supposed to act and the way they act as well as the differences that emerged between the banks. In line with the aim of the study we have then answered our problem definition; what role do banks play concerning the elevated prices on the private property market in the Gothenburg region? The capital made available by banks is what enables prices on houses to rise, but it is also rising due to the economy in general being favourable. Due to low interest rates and the boom in the business cycle which we are now experiencing, people have been able to afford to take larger loans in order to pay higher prices for their housing. The price on real estate is decided by supply and demand and if someone is willing to pay the price for a house or an apartment, then is that price not to be seen as the real value?
Research suggestions: We would find it interesting to look into the matter of advertising on the market for consumer credits. It can easily be established that some banks put a lot of effort into marketing themselves. Does the marketing agree with the demands of current regulation for marketing to be neutral and moderate? Does the advertisement change along with the increased competition?
Table of contents
GLOSSARY 2
INSTITUTIONS 3
ABSTRACT 4
TABLE OF CONTENTS 5
TABLE OF FIGURES 7
1 INTRODUCTION 8
1.1 Background 8
1.2 Problem discussion 9
1.3 Problem definition 9
1.4 Aim of study 10
1.5 Delimitations 10
2 METHOD 11
2.1 Our procedure 11
2.2 Research for our
framework 11
2.3 Empirical data and
analysis 12
2.3.1 Empirical selection
13
2.3.2 Interviews 13
2.3.3 Compilation of
empirical data and analysis 14
2.4 The accuracy of this
study 15
3 FRAMEWORK OF OUR THESIS
16
3.1 The situation on the
Swedish home loan market today 16
3.2 Regulation 17
3.2.2 The Swedish Financial
Supervisory Authority and consumer rights 19
3.2.3 The European
Agreement on a voluntary Code of conduct on pre-contractual information for
home loans 20
3.3 Calculation of living
expenses 21
3.4 The situation on the
Gothenburg real estate market 21
4 EMPIRICAL FINDINGS 23
4.1 Nordea 23
4.1.1 The development on
the market for home loans 23
4.1.2 The impact of rules
and regulations 24
4.1.3 The requirements to
be granted a loan 24
4.1.4 The valuation of
securities 25
4.2 Länsförsäkringar Bank
26
4.2.1 The development on
the market for home loans 26
4.2.2 The impact of rules
and regulations 26
4.2.3 The requirements to
be granted a loan 27
4.2.4 The valuation of
securities 28
4.3 Handelsbanken 28
4.3.1. The development on
the market for home loans 29
4.3.2. The impact of rules
and regulations 29
4.3.3. The requirements to
be granted a loan 30
4.3.4. The valuation of
securities 31
5 ANALYSIS 32
5.1 The competition on the
market for home loans 32
5.1.2 The credit mortgage
institutions on the market 33
5.2 The impact of rules and
regulations 33
5.2.1 Basel II 33
5.2.2 Internal regulation
34
5.2.3 Alternative to
regulation? 34
5.3 The requirements to be
granted a loan 34
5.3.1 Is it right for the
banks to not demand of the consumers to have a reserve for unexpected events?
35
5.3.2 The calculation of
living expenses – are the figures adequate? What about the interest calculated?
35
5.3.3 Is it the bank’s or
the private person’s responsibility to decide how much money to be spent on
housing and whether or not the borrower can afford the loan? 36
5.4 The valuation of
securities 37
6 CONCLUSIONS AND
SUGGESTIONS FOR FURTHER RESEARCH 38
6.1 Conclusions 38
6.2 Suggestions for further
research 39
LIST OF REFERENCES 40
