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The Mortgage Regulations provide guidelines for bank lending practices to mortgage customers.
– We decided to continue with the provisions of the credit regulations for a new period of four years, but with a mid-way evaluation. In this way, we give predictability to both individuals and banks, while committing to periodically assess whether the requirements are well suited to the market situation, says Finance Minister Jan Tore Sanner (H) in a Press release.
In September, Finanstilsynet issued a recommendation to tighten mortgage regulations, due to concerns about the historically high level of debt in the population. Among other things, the Authority has recommended that the maximum limit for the total debt of the borrower be reduced from five to 4.5 times the gross annual income and that the flexibility quota of the banks be reduced by half.
– Today’s regulations work well. So I don’t see any reason to adjust. Especially now that many are experiencing greater uncertainty about their financial future and we have seen more moderate debt growth over the past year, says the Minister of Finance.
Finanstilsynet also recommended that mortgages and consumer loans are now regulated by one regulation, and not two as has been the practice until today.
– It is the total debt of households that affects the risk of financial instability. In principle, this suggests that the regulations should cover all types of loans, but through consultation a need has emerged for a better basis for decision-making before deciding whether this should also be regulated in the regulations. It is important for me to be sure that we will not implement changes that have unintended effects, especially now that many are experiencing increased financial uncertainty, says the Minister of Finance.
Jan Tore Sanner believes that current regulations work well. (Photo: Terje Bendiksby / NTB)
Norges Bank also disagreed with Finanstilsynet’s assessments of an adjustment.
Norges Bank believes that the development does not indicate changes in the requirements for credit practices for mortgages and consumer loans now. However, Norges Bank believes that the stricter equity requirement when buying a secondary home should apply to the entire country and not just Oslo, “he wrote in a letter to the Authority.
Unhealthy high debt
The head of the retail market, Endre Jo Reite of BN Bank, is, like Finanstilsynet, concerned about those with unhealthy high debt and believes the ministry should have adjusted.
– It is desperate that the Ministry of Finance does not see the need for a tightening when more and more people borrow up to the maximum limits of the mortgage regulations. About 15 percent of households have unhealthy high debt, and while it is manageable at today’s low interest rates, they are vulnerable to any changes in income or interest rates, he says.
– The challenge is if we don’t use regulation in the short term because there are other things that would help more in the long term, says Endre Jo Reite of BN Bank. (Photo: Skjalg Bøhmer Violence)
He believes that regulation will not hurt first-time buyers and will result in a more stable debt ratio in the long run.
– We can find special schemes for first-time founders, but they are misused as an argument against regulation by groups that have always opposed regulation. Another thing that is claimed is that the main reason for the gallop in house prices is interest rates and the shortage of construction where people would rather live. Everyone agrees on this, Reite says.
Very satisfied
The real estate industry is satisfied with a continuation:
– We are very pleased that the Minister of Finance continues with the mortgage regulation, with a regional profile that takes into account that the housing market is more heated in the Oslo region, comments Carl O. Geving, CEO of Norwegian Real Estate Association.
He is also satisfied that the regulations are scheduled and will be available for evaluation again in the fall of 2022.
Carl O. Geving, Executive Director of the Norwegian Real Estate Association. (Photo: Fredrik Bjerknes)
– Mortgage regulations have mostly worked as planned, and it would be very unfortunate if Finanstilsynet’s sweeping amendments were adopted at a time when predictability and stability should be sought in the Norwegian housing market and economy, Geving believes .
Retail Markets Director Randi Marjamaa in Nordea also believes the following is correct:
– We are pleased that the current scheme is continuing. This provides predictability and, at the same time, flexibility in a situation where we see things change rapidly. As a bank, flexibility is especially important now so that we can help clients who are experiencing challenges, says Marjamaa.
Desired relief
– It is very positive that Sanner has not listened to Finanstilsynet’s proposal for a radical tightening of the regulations. This could weaken both the Norwegian economy and housing construction. After all, it is still a pandemic that is negative for the Norwegian economy. So a stable line has value in itself, says Henning Lauridsen, CEO of Eiendom Norge.
He is sure that the two regulations have been merged into one. On the other hand, they criticize the fact that there were no facilities for first-time buyers to obtain loans.
– We had proposed lowering the capital stock requirement from 15 percent to ten percent for this group, combined with the fact that it should be exempted from the five percent stress test if it insured against an increase in expenses through the entering into a long-term fixed rate agreement, Lauridsen says.
Director of Eiendom Norge, Henning Lauridsen. (Photo: Ole Berg-Rusten, / NTB Scanpix)
Eiendom Norge and the Norwegian Real Estate Association have proposed that first-time borrowers with good serviceability can be protected against an interest rate increase in the form of fixed longer-term interest rates.
– For those who are going to establish themselves in the housing market, it is a pity that we are not listened to, since there is a great risk that the differences between those who have and without a headquarters in the back will increase, says Lauridsen.
Increase housing development
– It is also not fortunate that they will continue to fine-tune the housing market through regional special provisions such as a flexibility quota because there is a shortage of supply for new homes in Oslo, says Lauridsen in Eiendom Norge.
– It is time for an effort to be made to eliminate one of the main causes of the growth of debt and house prices in press areas like Oslo, the housing deficit. For the unnecessary spike in house prices due to under-construction, mortgage regulations are just a symptom of relief that doesn’t solve the very cause of the problem, Lauridsen says.
Norsk Eiendom director Tone Tellevik Dahl believes that the government should propose concrete measures to ensure that more people can enter the housing market. (Photo: Private)
Norsk Eiendom also believes that it is a good thing that regulations are not tightened, but wish that something was done to ensure that more people enter the housing market.
– We miss that the government is taking an appropriate step to help more people enter the housing market. We need more housing to be built, says Norsk Eiendom CEO Tone Tellevik Dahl.(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.
