Given the large increase in Swedish house prices and households_ indebtedness since the 1990s, it is important to study the seemingly strong relationship between house prices and bank lending. Credit expansion may increase house prices and higher house prices increases the wealth and, thereby, the bank lending. A better understanding of the interrelationship between bank lending and house prices is important on a macro level, e.g., as it influences policy decisions geared towards both the housing and the banking markets. However, it is also important on a micro level. For instance, it may have an impact on credit rating, property valuation and decisions regarding allocating bank funds to households vis-‡-vis firms as well as the bank_s risk exposure, in particular related to potential bubbles on the housing market, and the bank_s exposure to default risks on the housing credit market. Our aim here is to analyze this interaction by investigating the Granger causality in Sweden over the period 1993-2010. The plan is to estimate a structured vector autoregressive model and a vector error correction model and thereby investigate if changes in bank lending causes house prices to change and/or vice versa. If our results indicate that causality goes in both directions, credit expansion and increased bank lending stimulate the housing market at the same time as rising house prices induce more bank lending to the household sector. Hence, in that case mortgage restrictions may have an effect on the housing market with lower prices in the short run. Disequilibrium in the lending market and housing market may also have an effect on the house prices in the long run. This is something that is going to be investigated. There are few studies examining the relationship between house prices and bank lending over time and across regions. Our ambition is to fill this gap. Our results may be of particular interest in the light of the current policy debate in Sweden regarding how to tackle a sharp house price increase in urban areas (partly) due to historically low interest rates.