Browsing by Subject "housing loans"

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  • Kärkkäinen, Samu; Nyholm, Juho (2021)
    Bank of Finland. Bulletin 1/2021
    How would the economy react in the long term if the maximum size of housing loans granted by banks were tied to the customer's income instead of the value of the dwelling to be purchased? This question can be examined using the Bank of Finland's general equilibrium model. Based on analysis, the introduction of a maximum debt-to-income ratio, i.e. a debt-to-income cap, would have a moderate impact on long-term economic growth. A debt-to-income cap could, however, dampen economic fluctuations relative to the current loan-to-value cap.
  • Bank of Finland (2019)
    Bank of Finland. Bulletin 2/2019
    Finnish households are carrying a worryingly large amount of debt. Housing loans and housing company loans have become more common and larger, and their repayment periods have become longer. In addition, the supply of consumer credit has become broader and more varied.
  • Bank of Finland (2017)
    Bank of Finland. Bulletin 5/2016
    The European Systemic Risk Board (ESRB), which is responsible for macroprudential oversight of the EU’s financial system, has issued a warning to Finland concerning the medium-term vulnerabilities related to household indebtedness and lending for house purchase. For purposes of risk mitigation, more efficient instruments should be made available to the Finnish authorities to limit the maximum size of new housing loans relative to the loan applicant’s debt-servicing capacity. There are, however, no threats to the stability of the Finnish financial system in the short term.
  • Bank of Finland (2017)
    Bank of Finland Bulletin. Analysis
    There are no immediate threats to the stability of the Finnish financial system. The relocation of Nordea’s corporate headquarters will, however, increase the banking sector’s exposure to structural vulnerabilities. The regulatory and supervisory reforms already implemented and participation in the European Banking Union will serve to mitigate the risks associated with the expansion of the banking sector, but adoption of a common European Deposit Insurance Scheme remains an important measure yet to be implemented within the Banking Union. An income-related cap on loans is needed to rein in the increase in household indebtedness.
  • Vauhkonen, Jukka (2016)
    Bank of Finland. Bulletin 2/2016
    Finland's neighbouring countries have actively adopted macroprudential instruments to counter stability risks relating to lending for house purchase. Sweden and Norway are taking strong measures to restrain housing credit growth and the associated risks. Of the Baltic States, Estonia and Lithuania, in turn, have imposed limits on the maximum loan servicing costs and length of housing loans so as to prevent risks proactively. Finland has adopted new macroprudential instruments more slowly. The loan-to-value cap that will enter into force in Finland in summer 2016 is more lenient than the requirements imposed in neighbouring countries.
  • Putkuri, Hanna (2016)
    Bank of Finland. Bulletin 2/2016
    Finland’s financial system is, by structure, vulnerable to risks associated with lending for house purchase. Housing loan volumes are large relative to other lending by banks and requirements on banks’ own funds. The fact that household debt levels have increased and that housing wealth constitutes a large proportion of household assets also increases the vulnerabilities. In addition, covered bonds secured by housing loans play a significant role in bank funding and investment. However, the increase in vulnerabilities has largely levelled off in the 2010s.
  • Topi, Jukka; Vauhkonen, Jukka (2017)
    Bank of Finland. Bulletin 2/2017
    Finland has prepared for risks on residential mortgage loan markets by setting a maximum loan-to-value ratio for housing loans. In addition, preparations are currently underway for imposing minimum risk weights on housing loans granted by banks. On top of these, to curb borrowing it would be advisable to consider the adoption of tools that take household income into account, such as loan-to-income caps. In this article, we use simple examples to illustrate how such instruments could be deployed to restrain dangerous growth in lending for house purchase and household debt, but will not express an opinion on the superiority of one tool over the others. Different instruments supplement each other, and no individual tool can solve all problems.
  • Kauko, Karlo; Norring, Anni (2018)
    Bank of Finland. Bulletin 2/2018
    Borrower-based instruments generally refer to measures aimed at mitigating the indebtedness of individuals or households. These instruments have most commonly been used to impose limits on housing loans. The purpose of borrower-based instruments is to contain household indebtedness and prevent house price bubbles. The most common instrument in Europe is the maximum loan-to-value (LTV) ratio for housing loans, i.e. the loan cap, which is also in use in Finland. Research has proven the effectiveness of borrower-based instruments in preventing both price bubbles and excessive indebtedness.
  • Eerola, Essi (2016)
    Bank of Finland. Bulletin 3/2016
    House prices have in the past 10 years risen in the Helsinki Metropolitan Area faster than in the other large Finnish cities. The widening price gap may reflect the increasing attractiveness of the Helsinki Metropolitan Area relative to the other major cities. At the same time, the decline in housing loan interest rates has reduced the user cost of owner-occupied housing. This may also explain why house prices have risen in areas where the supply of housing has not grown correspondingly.
  • Putkuri, Hanna; Voutilainen, Ville (2021)
    Bank of Finland. Bulletin 1/2021
    New mortgage-borrowers’ total debt relative to income has increased in recent years. A higher proportion of new loans for house purchase are granted to highly indebted households relative to income. High debt-to-income ratios are less common in the case of first-home loans than in regard to other new housing loans. High debt-to-income ratios are more common in growth centres than elsewhere in Finland. The proposed debt-to-income cap would curb growth in indebtedness relative to income.
  • Koskinen, Kimmo; Putkuri, Hanna; Pylkkönen, Pertti; Tölö, Eero (2016)
    Bank of Finland. Bulletin 2/2016
    Household indebtedness is high in the Nordic countries. Housing loans are a significant part of banks' business, and covered bonds are important for banks both as sources of funding and as investments. The large size of the Nordic banking sector, its high degree of concentration and its interconnectedness with insurance companies increase the importance of housing market-related risks for the financial system and the economy as a whole. The materialisation of threats would increase losses in lending and investment activities and the cost of funding.
  • Aaltonen, Markus (2021)
    Bank of Finland. Bulletin 1/2021
    The stock of buy-to-let mortgages stood at EUR 8.1 billion at the end of March 2021, comprising 7.9% of the total stock of housing loans. It is estimated that buy-to-let mortgages have grown faster than the rest of the housing loan stock since the global financial crisis. Buy-to-let mortgages are smaller than residential mortgages and have shorter repayment periods. In March 2021 the average interest rate applied on new buy-to-let mortgages was higher than on residential mortgages, but lower than the rate applied on housing company loans.
  • Putkuri, Hanna (2018)
    Bank of Finland. Bulletin 2/2018
    Finland's house prices have diverged regionally over the past decade, particularly between the Helsinki metropolitan area and the rest of the country. Regional disparities on the housing market are also reflected in the amount of housing debt held by households. Housing loans are large and have grown in absolute terms as well as relative to income, especially in growth centres, where housing is more expensive and subject to greater pressures from demand. Simultaneous growth in house prices and housing debt, if excessive, can pose a threat to the stability of the financial system.