UPDATE 1-Sweden's Social Democrats may back plans to force mortgage payoffs

Wed Jul 9, 2014 11:49am EDT

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(Updates with background)

STOCKHOLM, July 9 (Reuters) - Sweden's possible next finance minister said on Wednesday she could "see the point" of measures to compel households to start paying down their mortgages as a means of curbing soaring indebtedness.

Finance Minister Anders Borg has already asked the central bank and the Swedish Financial Supervisory Authority (FSA) to evaluate the possibility of introducing mandatory amortisation as a way of curbing soaring household debt.

Social Democrat economic spokeswoman Magdalena Andersson, who is widely expected to take over as finance minister if her centre-left party wins a September election as opinion polls suggest, also said mandatory amortisation should be considered.

"I absolutely think that is something interesting to discuss - I can see the point of a clearer amortisation requirement," Andersson told journalists.

Household debt in the Nordic country is among the highest in Europe at around 175 percent of disposable income and rising, while home prices have ballooned over the past two decades.

Many Swedes have interest-only mortgages and are repaying principal amounts only very slowly.

A report by the central bank, the Riksbank, earlier this year showed it would take an average 99 years for those who are paying off the principal to clear their mortgage debt.

Four out of 10 borrowers were not paying off their debt at all, the report showed.

A deeper-than-expected 50 basis point cut in interest rates last week has intensified concerns about households' borrowing.

Borg said last week the government wants to take a decision on amortisation at a meeting in November of Sweden's Financial Stability Council, which includes members from the Riksbank, the debt office, the FSA and the government.

"It sounds reasonable to discuss it in November," Andersson said on Wednesday.

The Social Democrats combined with likely coalition allies the green party and the left party hold a big lead in opinion polls ahead of the elections. (Reporting by Johan Ahlander; Editing by Catherine Evans)

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