June 26, 2022

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– They are used to terribly lower interest rates – E24

Sebastian Crippen, 28, is more concerned about the cost of food, electricity and fuel than about high mortgage rates.

Sebastian Crippen, 28, is looking for a refurbishment piece, and it was on display at Buelsen in Oslo on Monday. Here he asks in-depth questions about the kitchen fan for broker Duy Vidar Tang at Eiendomsmegler 1.
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– I’m not too worried that the interest rate will rise in the future, says Sebastian Crippen (28).

He was among 37 people shown on Monday afternoon in a 52-square-meter two-room apartment in Buelsen. Crippen, who is a civil engineer, says he has bought and sold an apartment within the past year. Now he is looking for something new. Preferably a rejuvenating object.

“I am looking for an apartment of this size that can be renovated without the cost exceeding the ceiling I set for myself in advance,” he said.

On Friday, Eiendom Norge will present its house price statistics for May.

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– More aware of costs

The 28-year-old says he realizes the costs are much more now than when he last bought.

– Only a year ago, I wasn’t aware of things like shared expenses and that electricity was included.

Crippen says he is more concerned about costs other than high mortgage rates.

– Banks provide some kind of security for a five per cent rate hike – and I don’t think the rate will go down to 7 per cent. Maybe between 4 and 5 at worst. I’m more concerned that other expenses will go up in addition, he says and mentions the big increases in food, electricity and fuel prices in the past year.

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Bathroom check: Sebastian Crippen (28), who is looking for a new apartment in Oslo.

– Used to drastically lower interest rates

It has been more than a decade since the key policy rate was more than 1.5 per cent. Norges has planned seven rate hikes before 2024 – three this year and four next year. This means increased expenses for everyone with large mortgages – and an interest rate level that many of those now entering the housing market have never had to contend with.

André Kallåk Anundsen, a housing researcher at OsloMet, believes that many young homebuyers have not considered what this could mean for their portfolios.

Housing researcher Andrej Kalak Anundsen was surprised by the strong growth of house prices in 2022.

Young homebuyers expected a terribly low level of interest, and some may not have taken into account what rising mortgage rates could mean for their personal money. This is despite the fact that interest rate increases have been clearly reported, says Andrej Kalak Anundsen, Oslo housing researcher Mitt.

– The housing researcher says that many of today’s mortgage borrowers have never seen a rise or a rise in nominal interest rates – it’s just something they’ve heard a generation of parents talk about at dinner parties.

He believes that this may contribute to an increase in interest rates, which will have a stronger effect than would have occurred if the interest rate level had been higher.

Surprised by the developments in housing prices

“To be honest, I would have thought we’d see a bigger impact of the rate hike already,” says Anundsen.

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A higher interest rate usually helps curb inflation in the housing market. But despite the rise in interest rates, prices continued to rise. In April, house prices in Norway rose by 0.3 percent. Adjusted for seasonal adaptations, it has not changed.

The housing researcher stresses that he is not worried that many young homebuyers will not be able to service housing debt.

But although stress tests by banks suggest that one should be able to withstand a five percentage point rise in interest rates, and still be able to maintain usable consumption, there are still some who have not taken into account how it will affect So wallet in practice, he says.

– I highly doubt that the interest rate will rise by more than five percent. And the bank thinks my money will take over, says Sebastian Creppen, 28, who is looking for a new apartment in Oslo.

More money will go to debt service

In the revised state budget for 2022, it was noted that Norwegian household debt has grown faster than income over several years. The government points to the high debt burden and high property prices as the biggest weaknesses in the Norwegian financial system.

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“Rising debt means that a very large proportion of household income goes to servicing interest and installments, despite lower lending rates. It is likely that the share will rise in the future as mortgage rates rise.”

The government further wrote that most households “should have taken into account increases in interest rates, given the low interest rate level”.