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On Thursday, Finanstilsynet released the annual mortgage survey, which looks at the lending practices of the largest banks. It 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 equity.
– This is concerning as these borrowers can be particularly vulnerable in the event of loss of income, rising interest rates or falling house prices, says director of digitization and analytics Per Mathis Kongsrud in a press release.
Historically high
In this year’s survey, 45 percent of the loan amount granted was taken by borrowers with an indebtedness ratio greater than 400 percent, while 27 percent was granted to borrowers with an indebtedness ratio greater than 450 percent. hundred.
The survey also shows that borrowers taking out new home mortgages have high consumer debt. Borrowers who took out new home mortgages had an average debt as a percentage of annual gross income of 338 percent. That’s 4 percentage points more than in 2019.
– The total debt of Norwegian households has increased for many years and is now historically high, says Kongsrud.
Highest debt ratio
Loans made to first-time buyers accounted for 10 percent of the volume of loans made, which is slightly higher than last year. First-time buyers also accounted for 23 percent of loans that go beyond the requirements of mortgage regulations.
– Many first-time buyers are close to the requirements for a maximum debt ratio or a loan-to-value ratio. Half of all loans made to first-time buyers have a loan-to-value ratio of 80 to 85 percent, which is quite high, says section manager Thea Birkeland Kloster at Finanstilsynet.
19 percent of first-time buyers had a loan-to-value ratio of more than 85 percent.
Randi Marjamaa, Executive Vice President of Retail Market for Nordea. (Photo: Øyvind Elvsborg)
The head of the retail market in Nordea Norway, Randi Marjamaa, says that this year the bank has seen a large increase in new loans.
– We noticed that there has been a lot of activity in the market. We prioritize helping first-time buyers enter the market and customers with financial difficulties when we deviate from regulations. For first-time buyers, there are often new graduates at the beginning of their careers where we can see that they want an income development that allows them to manage debt and have a healthy economy in the future, says Marjamaa.
– They were worried
The Mortgage Regulation, which regulates the credit practices of banks, has been recently consulted and the Ministry of Finance will make a new recommendation to the regulation before the turn of the year.
– We are concerned that the current findings will affect the tightening of regulations and make it more difficult for first-time buyers and others who will enter the housing market again, says CEO Tone Tellevik Dahl at Norsk Eiendom.
Tellevik Dahl tone. (Photo: Tore Meek / NTB)
Norsk Eiendom is an industry association for real estate developers in Norway with around 220 members.
– At Norsk Eiendom we are also concerned about the total debt ratio of the company, but we believe that it will be wrong if it entails restrictions on mortgage regulations. There are other methods that can be used to reduce total household debt without hurting home buyers, Tellevik Dahl believes.
Finanstilsynet has been concerned about Norwegian household debt for a long time and has proposed tightening new mortgage regulations that will apply from the new year, including a lower loan-to-value ratio. Current regulations entitle you to borrow five times your own income. Finanstilsynet has proposed reducing this to 4.5 times its own income.
– It will make it impossible for young people to buy a house in press areas, like Oslo, believes Tellevik Dahl.
Believe in interest rate hikes
Chief Economist Christian Frengstad Bjerknes of the Norwegian National Housing Association believes the mortgage survey shows that many borrow too much.
– The consequence will be that Norges Bank must raise interest rates faster than planned, believes the chief economist.
He believes that it is as expected that young people are being required to stay within the framework of mortgage regulations, but points out that the debt ratio of the senior guard has also increased over the years.
– The debt burden for the 65 and older age group is up 288 percent in this year’s survey, roughly unchanged from 2019, but still 19 percentage points above the 2018 level. The good news health and more free time contribute to many consuming and lifestyle continuing into retirement. Zero interest rates allow the dream of a cabin in Hvaler or Hemsedal, or two youth rooms in St. Hanshaugen, says the chief economist.
Change Jo Reite, Head of Retail Market at BN Bank (Photo: Skjalg Bøhmer Vold)
Endre Jo Reite, Head of Retail Market at BN Bank, also notes that the debt ratio among seniors is as big a concern as it is for youth.
– Young people are very likely to earn higher income over time. It is difficult to bear the costs of a loan up to three times greater than the income when one is at or nearing retirement age. Many seniors also borrow without installments, or as framework loans, and living off home equity prevents you from moving prematurely when you’re older, Reite says. (Terms)Copyright Dagens Næringsliv AS and / or our suppliers. We would like you to share our cases via a link, which leads directly to our pages. Copying or other use of all or part of the content can only be done with written permission or as permitted by law. For more terms, see here.
