Lenders in Sweden have chosen the “worst” moment to tighten lending standards in Scandinavia’s biggest economy, Royal Bank of Scotland Group Plc said according to a Bloomberg report.

“I can’t envision a worse timing when we have an economy with such low inflation, a depleted monetary policy, a big output gap in the economy,” Pär Magnusson, RBS’s chief economist in Stockholm told the news bureau. “Tightening is exactly the opposite of what this economy needs.”

He said the decision by the Swedish Bankers’ Association last week to force homeowners to amortize all new mortgages worth more than 50 percent of their properties risks hurting demand in an economy already grappling with disinflation and its associated risks.

However, Moody’s considers that the new recommendation by the Swedish Bankers’ Association that new mortgage loans should amortise down to 50% of property value, instead of 70% currently, is a credit positive for banks and covered bonds because it leaves a smaller share of mortgage debt on a non-amortising, interest-only basis. In addition, greater amortisation is a step to halt the ongoing increase in household debt.