Chief Economist on housing prices after a recent survey by the Bank of Norway: – Big drop during autumn

Chief Economist on housing prices after a recent survey by the Bank of Norway: - Big drop during autumn

– We see that banks are tightening their lending to households, and it seems that banks are more reluctant to credit. They are more cautious, says chief economist Sarah Midtgaard of Handelsbanken.

Every quarter, the central bank asks the largest banks in the Norwegian market about changes in the demand and supply of loans to individuals and businesses, also known as a lending survey. On Thursday morning, Norway Bank introduced Lending Survey for the Third Quarter.

The survey shows that despite higher interest rates and higher prices, the credit practices of banks for both households and non-financial firms were somewhat unchanged in the third quarter. Given the macroeconomic outlook, credit practices towards households are still expected to tighten in the fourth quarter.

Confirms the decline in the housing market

The survey also showed that demand for loans from households and non-financial firms declined slightly in the third quarter. According to Midtgaard, the decline in loan demand is helping to dampen credit growth, and confirms the bank’s expectations of lowering home prices.

We envision a significant decrease during the fall, more than the usual seasonal effects, says Midgard.

At the beginning of October, it became clear that Finanstilsynet recommends tightening the requirements for obtaining a mortgage. This means that you will be able to borrow less for housing after the new year – if Finanstilsynet manages to get what you want.

Survey confirms downside risks to future home prices, concludes Midgard.

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But she stresses, however, that today’s investigation is not seen as anything too dramatic.

Increase the use of grace period

At the same time as fewer people are taking out new loans, the use of interest-free installments is increasing.

In recent months, the Norges Bank has taken aggressive action against accelerating inflation, in the form of unusually sharp increases in interest rates. From zero interest during the pandemic, the prime rate is now 2.25 percent, and mortgage rates have followed suit.

Thursday last week Randy Marjama, Head of Personal Market at Nordea Norway, expressed his concern due to the increase in the number of customers requesting interest-free installments..

Norges Bank’s survey confirms reference’s concern: Four out of ten banks reported increased use of zero-interest loans on new loans in the third quarter and six banks expect some increase in the fourth quarter.

According to the survey, no banks recorded changes in the repayment period.

stricter credit practices

Demand for loans to non-financial institutions was slightly lower in the third quarter. The survey shows that the same applies to the demand for commercial real estate loans.

The survey showed that this year’s development means that banks are setting somewhat higher requirements for equity and serviceability for new loans for commercial real estate.

The third quarter was also marked by somewhat stricter credit practices, and several banks reported that the macroeconomic and industry-specific outlook contributed to this. Most people expect these forecasts to have a somewhat taut effect in the fourth quarter as well.

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Dalila Awolowo

Dalila Awolowo

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