The Effect of the Monetary Policy Rate on Housing Prices in Sweden

Sammanfattning

Swedish housing prices have heavily increased over the last decades and the debt level has remained high and mortgage contracts are mostly based on variable interest rates. This thesis examines the relationship between the Swedish central bank’s policy rate and housing price growth in Sweden. The purpose of this thesis is therefore to analyze how housing prices respond to the policy rate both in general and for specific types of housing. To conduct the analysis an Ordinary Least Squares (OLS) regression is used. The data is monthly and covers the period from September 2005 to August 2025. Housing prices are examined at an aggregate level and for single family households and apartments. To account for delayed monetary transmission and potential endogeneity, only lagged changes in the policy rate are included. Based on our theoretical framework the models also control for real income, household expectations, and real rent.The results show that a higher policy rate is linked to a decrease in the growth of housing prices but the effect does not appear immediately. Instead, housing prices respond after some time. The impact of the policy rate also differs across housing market segments. Prices of single family houses are affected the most and with the longest delay, apartment prices adjust more quickly but to a smaller extent. Our findings indicate that monetary policy has an important influence on housing prices in Sweden, but that the effect varies depending on housing type.