Mortgage funds : Examining the emergence of new mortgage finance methods in Sweden

Abstract: Recent reports from the Swedish Financial supervisory authority and the Swedish competition agency suggest that while bank profitability is high in Sweden, the dominant position of a handful of actors have created a situation where consumers are left displeased. The mortgage market has been highlighted as one of the most concerning markets and yet, gross margins on mortgages are reaching record levels. However, as of recent, two new actors have announced their intention to challenge the incumbent banks by importing a new mortgage financing method from the Netherlands. The financing model is rooted in the creation of a mortgage fund and could have several particularly interesting implications for the Swedish mortgage market. Thus, the purpose of this thesis is to examine mortgage funds and its ability to change current market structures in Sweden. By examining the relationship between return on assets and cost-to-income ratios for Swedish mortgage brokers during 2011-2017, the level of competition on the Swedish mortgage market is estimated and examined in relation to the introduction of mortgage funds. It is found that the introduction of mortgage funds in Sweden have caused a structural shift of the market by altering the value-chain of Swedish mortgages. The conclusion of this study is that mortgage funds, if managed correctly, can be a helpful addition to the Swedish mortgage market by bolstering competition and diversity.