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More people will have greater purchasing power with lower interest rates. – You can offer 10 to 15 percent more on housing than before.
Fewer and fewer have borrowed from the bank in recent years, with many believing that the impact of the corona pandemic on Norwegian portfolios would mean that few would venture into the property market and take out loans during the spring and summer.
But the Norwegians did not stop going on tour, talking to the bank and asking for loans. On the contrary. Several places in the country, including the capital, have experienced a hot summer real estate market with rising prices and high turnover.
The pace has been so fast that both Norges Bank and Finanstilsynet now believe the government should strengthen the banks’ ability to provide more flexibility to certain borrowers during the crown crisis.
– With very low interest rates, there is a danger that house prices and household debt will rise further from an already high level. This will increase the risk of financial instability in the Norwegian economy in the coming years, Finanstilsynet wrote on Friday.
Read more: Major Bank Crash Report – Predicts Strong House Price Growth
Banks are seeing great growth
According to Eiendom Norge, 2.3% more homes were sold this year than at the same time in 2019. Elisabeth Gilje Pedersen of Sparebank 1 SR-Bank says that young people in particular have ensured that the bank receives 60% more mortgage applications in the second quarter compared to the same period last year.
– It turns out that several took advantage of the crown period this spring to change houses and apartments, buy a cabin and renovate. Young people especially do not seem to have lost faith, and they look very positively to the future, says Pedersen.
She says the bank increased the volume of loans to youth between the ages of 25 and 34 by 36 percent in the second quarter. Mortgage sales increased from NOK 2 billion last year to NOK 2.7 billion this year in the same quarter. Several of the borrowers who contribute to loan growth are completely new to the housing market and they must be reminded that Norges Bank’s key interest rate will not always be zero.
– Young people in the implantation phase with secure jobs have gained greater purchasing power due to the reduction in interest rates. But it’s important to remind ourselves that this era of low interest rates doesn’t last forever, says Pedersen.
YOUNG ADULT LOANS: Banks have had the opportunity to make loans to customers who do not meet the standard requirements for bank loans. But it is still young people with secure jobs, equity, or parents as guarantors who borrow. – A crossword puzzle, says Elisabeth Gilje Pedersen at Sparebank 1 SR-Bank.
Photo: Sparebank 1 SR-Bank
Randi Marjamaa, head of Nordea’s “personal banking” area, saw loan growth of 14% in the second quarter. She says the loans often go toward new homes, renovations and youth mortgages.
– We must not hide under a chair that changes in interest rates have led to established couples and families with secure jobs now being able to offer between 10 and 15 percent more in housing than before. But keep in mind that expectations, as seen now, are that interest rates will rise again towards the end of 2022, says Marjamaa.
GROWTH: Nordea and Randi Marjamaa, director of personal banking, see loan growth of 14 percent annualized, which means the rate in the second quarter would have yielded 14 percent annual growth for the year.
Photo: Nordea
Also Read: Chief Economist Permanently Predicts Expensive Vacation Abroad After Crown Crisis
Reject that more will become debt slaves
In mid-August, the International Monetary Fund (IMF) warned that Norway’s financial system is vulnerable due, among other things, to high household debt and high property prices.
The high debt of the population is also the reason why Finanstilsynet now believes that the greater flexibility of banks towards borrowers in light of the crown crisis should end soon.
Ingrid Blekeli Spiten, executive vice president of retail at DNB, says DNB received 30% more mortgage applications in the second quarter compared to the same period last year.
– We experienced great, great speed in the second quarter, but progress has been even stronger in July and August for us. It will be exciting to see when those numbers become clear, says Spiten.
The principal is not concerned that borrowers will have a hard time paying back. Spiten says the bank has prioritized young people and clients in marital breakdown when they have used the waiver fee in mortgage regulations. Borrowers will continue to bear a 5 percent impact increase, recalls the director of DNB.
– But is there no risk in lending so much to young people in a situation with very low interest rates? Are you creating future debt slaves?
– I realize that someone thinks so. Experience has shown that DNB borrowers are good at servicing their loans. We have few defaults and good advisors who have a duty to advise against signs that borrowers are going too far, Spiten says.
HIGH SPEED: – We had 30 percent more mortgage applications in the second quarter compared to the same period last year. In terms of numbers, there are probably more than, say, SR-BAnk, which had a 60 percent increase as we are bigger, says Ingjerd Blekeli Spiten of DNB, executive vice president of personnel market.
Photo: DNB
SR-Banks Pedersen emphasizes that mortgage regulations still set requirements on how much of your home’s equity can be purchased with borrowed money and how much loan you can have relative to your income.
– We have used the exception quota very little. It has been used primarily to help clients in difficult financial situations, says Pedersen.
She believes that it is a crossroads that in the last five months more people who have been for reasons of insecurity have not gone to the bank to apply for a loan.
– When we are within the 20 percent limit, it may indicate that it is young people with secure jobs, equity, or parents with the opportunity to act as guarantors who are now borrowing. It is a crossroads that the COVID-19 situation can create greater differences between young people in insecure and low-paid jobs and well-paid people in safe jobs. Perhaps more pride is needed in professions like retail and care. In fact, there may be greater loan opportunities than you really think, says Pedersen.
Also read: The summer real estate market can contribute to faster jumps in interest rates
Read more: Sbanken with juicy interest rate cuts: – Clients are coming
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