There are many requirements if you want to borrow money in this country. These requirements are contained in the lending regulations, for which the government is responsible. Today, for example, you must have 15 percent equity to buy a house, and you cannot borrow more than five times your annual income. Asking the government to remove the installment requirement In addition, those who have taken out a loan that is more than 60 percent of the value of their home will be forced to pay installments on the loan every month. – It is completely unnecessary. Because it means that people who can actually afford it can end up with payment problems. There are people who would like to be able to postpone paying in installments, but are still forced to, says associate professor Martin Blomhoff Holm at the University of Oslo. Facts about the lending regulations The lending regulations were created in 2015 with the aim of reducing the strong house price growth and household debt, when we were in a period of low interest rates and when people built up a lot of debt. The regulations set requirements for how banks can lend money. The rules set requirements for the customer’s ability to pay, the customer’s total debt in relation to income (debt ratio) and the size of the loan in relation to the home’s value (loan ratio). Those who take out loans must accept an interest rate increase of three percentage points, and at the same time an interest at least 7 percent. This was changed in 2022. Previously, you had to accept an interest rate rise of five percentage points. You can borrow a maximum of five times gross annual income. You can only borrow 85 percent of the purchase price of a home, which means that you must have 15 percent equity Those who have taken out a loan that is more than 60 percent of the value of their home, are forced to pay installments on the loan every month. The banks have a flexibility quota which means that in 10 per cent of loan applications they can offer loans beyond the rules laid down in the regulations. In Oslo, the quota is 8 per cent. The regulation has been revised and passed on several times. Today’s lending regulations apply until 31 December 2024. Source: The government He asks the government to think carefully about the consequences and what kind of households the lending regulations are affecting today. This is how the lending regulations for the Lending Regulations were created in 2015, after the fall in oil prices in 2014 – when interest rates fell and people started borrowing a lot of money. The aim was that rules for how the banks could lend money should help to reduce household debt and reduce the sharp increase in house prices. Although the banks have a certain flexibility to make exceptions to the rules – such as granting installment exemptions to some – Holm believes that the installment requirement is something the government must now address: – I hope the government adjusts the lending regulations. UNNECESSARY COSTS: Associate Professor Martin Blomhoff Holm believes that the current rules have many unnecessary and antisocial consequences. Photo: ISMAIL BURAK AKKAN / news Holm believes that today’s rules and requirements also have other antisocial consequences. For example, that one is required to have 15 percent equity in order to buy a house. – This means that those who have a good ability to pay do not get into the housing market. While young people with particularly rich parents have it much easier to get in, says Holm. He believes that it would have been fairer if one adhered to the requirement of how much debt one can take on in relation to income – which today is five times gross annual income. Wants to remove the rules, but warns Holm gets support from Jan Ludvig Andreassen, chief economist in the Eika group. Andreassen believes that one should, for example, go from five to six times income. The last time Finanstilsynet made recommendations to the government in the autumn of 2022, they thought instead that they should reduce the maximum limit to 4.5 times income. CARS AND BOATS: Jan Ludvig Andreassen points to the 80s, and cautions against loosening the lid on all credit rules at the same time. Photo: Torbjørn Brovold / news Andreassen actually believes that the entire lending regulation should be removed, but believes it is risky if it happens too quickly. – We cannot have a tyrannical state that meddles too much in people’s private finances, says Andreassen. – But we learned in the 80s that it is dangerous to loosen all credit rules at once. Then we risk people borrowing and buying houses, cars and boats blindly, with a real blue Monday afterwards. Pointing to the construction of several housing estates It is the government that has its hand on the wheel in this case, as a regulation does not go through the Storting. The recommendations from the Finanstilsynet will go out for consultation in the autumn, before the government must conclude before the end of the year. Last time the Norwegian Financial Supervisory Authority made recommendations, they asked for austerity measures – but the government did the opposite. WAIT AND SEE: Housing policy spokesperson Siri Gåsemyr Staalesen in the Labor Party will wait and see the recommendations to the Norwegian Financial Supervisory Authority and what emerges in the hearing before she concludes on the matter. Photo: Hallgeir Braastad / news Housing policy spokesperson Siri Gåsemyr Staalesen in the Labor Party will not say concretely what she thinks should happen, until she has seen the recommendations and read the hearing responses. But: – If we only let people borrow more, without building new homes, then house prices will only increase, as people get more money to bid for, says Staalesen, who believes it is also very important that more are also built residences. Published 23.08.2024, at 08.15
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Economist thinks people should avoid paying down their home loan quickly – news Norway – Overview of news from different parts of the country
