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Additionally, about half of first-time buyers have loans that approach the maximum loan-to-value requirement, compared to about a quarter of all borrowers.
This is demonstrated by the recent Finanstilsynet survey on mortgages.
The loan-to-value ratio indicates what percentage of the home price the buyer has borrowed from the bank.
When one in five first-time buyers has a loan-to-value ratio of more than 85 percent, that means they have an equity value of less than 15 percent of what the home costs.
In addition, a slightly higher proportion of first-time buyers have a 475-500 percent borrowing rate than other borrowers. This means that they have borrowed almost five times more than they earn.
– I probably think that a good portion of these get more loans because they have added security in their parents’ house, which means the lender can ignore the requirement, and then there are probably a number of first-time buyers who have a high level of skill. and safe work fall into the flexibility quota, says Carl O. Geving of NRK’s Norwegian Real Estate Association.
New mortgage regulations are coming
Equity of 15 percent is one of the requirements for first-time buyers today. At the same time, banks may violate one or more of the requirements of the mortgage regulations for part of the loans they make. This gives banks room to exercise discretion when making loans.
The old mortgage regulations expire at the end of the year, and the government will likely introduce a new regulation shortly.
– We have proposed that one should consider introducing a new rule that allows young people with high service capacity who do not have parental help and who are struggling to raise enough social capital, should be able to borrow money with less social capital, in exchange for tying the interest rate. says Geving.
The average loan-to-value ratio for new loans was 65% in this year’s survey. It is the same level as in 2019, but somewhat higher than in previous years.
Higher debt ratio: – Worrying
Loans made to first-time buyers accounted for 10 percent of the volume of loans made for repayment loans in this year’s survey, which is about 1 percentage point higher than last year.
The average debt ratio of borrowers who took out new mortgages rose to 338 percent in this year’s survey.
– This year’s mortgage survey shows that a large and growing proportion of new loans are taken out by borrowers with high total debt. Many borrowers have high total debt relative to income and mortgages that account for a high proportion of home value, says director of digitization and analytics Per Mathis Kongsrud.
– This is concerning, as these borrowers can be particularly vulnerable in the event of loss of income, rising interest rates or falling home prices.
Geving says that the tightening of current lending practices can throw the housing market out of balance and create problems for the economy.
Carl O. Geving at the Norwegian Real Estate Association.
Photo: CF-Wesenberg
– We share Finanstilsynet’s concern about vulnerability in the household sector and the risk of financial instability as a result of the accumulation of debt, but we consider that the risk is greater if credit practices become too tightened. A well-functioning housing market is a very important factor in the recovery of the Norwegian economy, Geving says.
The debt-to-loan-to-value ratio increased 8 percentage points last year. One in four new loans was obtained by borrowers with a loan-to-value ratio of more than 75 percent of home value and more than four times annual income. This led Finanstilsynet last year to believe that we had more vulnerable borrowers.
