The Financial Supervisory Authority of Norway (Finanstilsynet) wants to implement laws that make it harder for banks to grant mortgages. In order to limit the extenisve growth in real estate prices and household debt, the Financial Supervisory Authority has proposed a law that requires at least 2,5 percent of a mortgage to be paid annually from the first year.
On March 6, Finance Minister Siv Jensen (The Progress Party/FrP) gave the Financial Supervisory Authority ten days to evaluate new measures that could be implemented in order to limit the growth of both household debt and property prices.
The authority submitted its response on Monday, and some of the measures include making it more difficult to be granted a mortgage. The proposal includes raising the interest rate used to test an applicant's ability make his or her payments if the interest rates were to go up. The test rate is currently at five percentage points more than the current interest rate, but this may now increase to six.
The Financial Supervisory Authority also wants to introduce a new term that demands that 2,5 percent of the mortgage is paid down annually from the first year, for all mortages where the loan to value ratio exceeds 65 percent.
The authority wishes to keep the maximum loan to value at 85 percent of the property's total value, but this may be increased if there is sufficient security in a secondary property.
The Ministry of Finance will have the final say in deciding on which measures that will determine the bank's mortgage practices.