The Financial Supervisory Authority (FSA) orders Norwegian banks to quickly start implementing new guidelines and terms for mortgages.
In spite of massive protests, the FSA has decided on new guidelines for safe lending practices to homebuyers. The changes take effect today.
The new guidelines are meant to tighten and expand on the existing policies. Their goals are to help decrease each households total debt, as well as relieve some of the pressure on today’s housing market by implementing more sober lending practices. “The guidelines should also help reduce the risk of people getting into a situation where they cannot manage their loan payments,” Morten Baltzersen, Director of the Norwegian FSA, tells DN.
The FSA emphasizes that banks will have to look at the overall situation of their client before giving a loan, including other debts and expenses. They will also have to look at how their client would do in the case of an increase in interest rates of five percentage points..
The FSA alerted the industry of the predicted changes in September, and they have stayed the same. Some of the other new policies include mortgages generally not exceeding 85 percent of the purchase price, and for lines of credit what is considered a safe borrowing rate has been lowered from 75 percent to 70 percent.
“It is expected that the banks will immediately start their work with adjusting their existing policies to accommodate the FSA’s new guidelines,”Baltzersen says.
The Norwegian Bank (DnB) thinks that their youngest clients are the ones who will suffer the most under the new guidelines. “We’ll probably see a decline in the number of young people applying for loans,” says Director of Communication Thomas Midteide.
Finance Norway (FNO) has been one of biggest critics towards the new FSA’s new guidelines, but the Bank of Norway and the Consumer Ombudsman are positive, DN reports.
(DN)(Picture Dagbladet)
Julie Ryland
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