In an article published by business daily Dagens Industri on Friday, Tomas Pousette and Tor Borg at SBAB reject as too simplistic BKN’s explanation that rising interest rates will cause the Swedish housing market to nosedive.

The pair, who are employed as economists at the state-owned mortgage lender, said the idea that rising interest rates will increase mortgage payments is “no surprise” and that most market commentators have incorporated this in their projections.

Pousette and Borg argue that Riksbanken rate hikes will not come as a surprise to households as the rates will tick up gradually – taking three years to “normalize” at around 4 percent.

The pair also questioned BKN’s interpretation of statistics it claimed to show that Swedish households have been mortgaging their homes for alternative investment or consumption to the tune of 45 billion kronor ($6.3 billion) per annum over the past decade.

The SBAB economists argue that it is very difficult to ascertain how much of this money has been used for maintenance and repairs of existing properties and thus the amount extracted is probably much lower.

They recognise that there would have been much more cause for concern had this money been used for the consumption of cars, holidays and food.

Furthermore the pair also point out that household savings rates have climbed steeply during the finance crunch and that mortgage holders have a significant buffer to guard against the added burden of rising interest rates.

“The forecast from BKN of a 20 percent decline in housing prices is thus excessively pessimistic,” they conclude.