1. 1 Factors behind interest rate decisions among apartment buyers in Stockholm Maria Hullgren, Institute of Technology, Stockholm Aim of Paper: Which factors affect the choice of interest rates? Investigate whether the results from previous international research also apply to Swedish conditions and whether there are additional factors of influence which are significant. See whether different types of Swedish households choose different interest rate lock-in periods.

2. 2 Background to survey; Price changes (Data from Mäklarstatistik) 1/1/2004, prices in SEK 1/7/2008, prices in SEK Detached houses; Sweden Approx. SEK 1.3 m.Approx. SEK 1.9 m. (+46%) Detached houses; Stockholm County Approx. SEK 2.6 m.Approx. SEK 3.6 m. (+38%) Condominium; (bostadsrätt) Sweden Approx. SEK 12,500 /sq.m. Approx. SEK 18,000/sq.m. (+44%) Condominium; (bostadsrätt) Stockholm County Approx. SEK 18,000/sq.m. Approx. SEK 32,500/sq.m. (+80%)

3. 3 Indebtedness of households 2004-2008 2004 Total loans of households=SEK 1,400 billion. Of these, about 75 per cent, or SEK 1,050 billion, was security in the form of small houses. 2008 Total loans of households=SEK 2,125 billion. Of these, about 80 per cent, or SEK 1,7 billion, was security in the form of small houses.

4. 4 Mortgage rate changes & implications for households Change in the type of home loan lock-in period that households have chosen. In 2004, 54 per cent of new lending took place at adjustable interest rates. In 2008 this share had risen to 62 per cent. During the period 2004-2008, home loan interest rates have fluctuated substantially in Sweden: adjustable/three-month rates have been at a minimum of 2.44 per cent (2005) and a maximum of 6.40 per cent (October 2008). Households may have become more sensitive to changes in the interest rate position and the situation in the real estate market.

5. 5 Earlier findings: ChildrenAgeMoverIncomePrice Baesel & Biger (1980) XX Statman, (1982) X Dhillon, Shil- ling & Sir- mans (1987 XXX Smith (1987)XX Brueckner & Follain (1988) XXX Brueckner (1992) X

6. 6 Earlier findings, cont: ChildrenAgeMoverIncomePrice Sa-Aadu & Megbolugbe (1995) XXX Sa-Aadu & Sirmans (1995) XXX Campbell & Coco (2003) X(X)X Paiella & Pozzolo, 2007 XXXX Coulibaly & Li (2007) XX

7. 7 Survey, spring 2008: Data Criteria: Have purchased an apartment; not a detached or terraced house. Have taken out a loan in connection with the purchase. And that the apartment should be located in the centre of Stockholm. Interviews: 30 households In person or by telephone within a fortnite from taking possession of property. Duration: 20-30 minutes

8. 8 Survey questions Purchase price Cash down payment and loan portion respectively How much fixed – adjustable rate? How did you come to a decision about which to choose? What factors haves had an influence? Previous experience of home purchase and choice of interest How long do you plan to live in the new home? Monthly fee Gross income of the household Amortization Age Number of children in the household

9. 9 Basic data about the interviewees: Lowest/ highest value Average value Median Age (years)25-5734.532.5 Income per household (SEK) 264.000- 1.500.000 692.400660.000 Loan amount/ Annual income 2.55-8.104.514.48 Loan amount/ Price 0.13-1.00.690.76

10. 10 Basic data; contin. First-time buyers 5 Families with children 9 ‘Movers’2 Single-person households 9 First-time buyers 5

11. 11 Findings: Chi square value Significance 5 % level Significance 1 % level Media 7.45Yes Income 3.70No Interest difference 1.77No Family & friends 1.77No Bank staff member 1.64No Average age of household 1.20No

12. 12 Findings: Chi square value Significance 5 % level Significance 1 % level Specialist knowledge 1.20No Children in household 1.20No Household composition 0.11No Loan/income0.04No Loan/price0.01No