Finanstilsynet: Many people with mortgages risk a demanding situation if house prices fall

The overall debt ratio among borrowers who take out new mortgages falls somewhat in this year’s survey after a marked decline last year.

But the debt ratio is still at a high level and higher than before the requirement for a maximum debt ratio was introduced in 2017, writes Finanstilsynet in a press release.

– Many borrowers take out loans close to or above the maximum loan-to-value ratio and risk ending up in a demanding situation if house prices fall. The equity requirement contributes to increased security for both the borrower and the lender, says director of risk monitoring and macro supervision, Knut Haugan.

Many with high levels of debt

The requirement, which was introduced in 2017, led to a clear drop in the proportion of new loans to borrowers with a debt ratio above the requirement. This proportion is around two per cent in this year’s survey. It is roughly unchanged from 2023.

A somewhat smaller proportion of the new loans are granted this year to borrowers with total debt close to the limit of five times income, but there is still a large proportion (38 per cent) given to borrowers with a high debt ratio (over four times gross annual income) .

Small increase in the loan-to-value ratio

This year’s survey shows a slight increase in the average loan-to-value ratio for new repayment loans and credit lines, to 64 and 45 per cent respectively.

For both types of loans, the proportion of the lending volume that is approved increases with a loan-to-value ratio close to the limits in the lending regulations. At the same time, there is a marginal increase in the proportion of the loan volume with a loan-to-value ratio above the regulatory limits.