Record-high household debt

The average Norwegian household’s debt, in relation to their income, has never been higher.

Norwegian households’ debt has continued to increase at a much higher rate than people’s income. The Bank of Norway is now advising each household to take a close look at their finances and emergency funds. “We have never been burdened with more debt in relation to our income than we are now,” Birger Vikøren, Director of Financial Stability at the Bank of Norway, tells Aftenposten. The Bank of Norway published a report Tuesday on financial stability, which shows how well armed, or vulnerable, the Norwegian economy is when faced with economic uncertainty both at home and globally. According to the Central Bank, the number of households that are financially vulnerable is concerning because so many people live without a financial buffer. In 2009, numbers showed that 14 percent of Norwegian households have a financial margin of less than one monthly paycheck. The numbers may be even higher today. An increasing number of people borrow up to 90 percent of the purchase price when they buy property. Vikøren thinks that one of the reasons is a structural change in the lending market. “As long the property prices keep rising, the amount of debt will also increase,” he says. The Bank of Norway has done estimates that show that if interest rates increase by five percentage points, 23 percent of Norwegians would have emergency funds of less than one monthly paycheck. The Central Bank is urging people to take a close look at their finances, and consider how well they would be covered if faced with financial insecurity.
(Aftenposten)
Julie Ryland

Wednesday, 30 November 2011 08:39