Categorized | International

Norway Seeks Tougher Mortgage Restrictions

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In an effort to prevent a potentially disastrous bubble, Norway’s bank regulators have requested tougher limitations be placed on qualification standards for mortgage loans.

Currently, Norwegians are required to put down only ten percent for a down payment in order to secure a loan, regardless of the size of the loan. Regulators fear that small down payments allow for greater risk, as the amount of credit to value ratio increases substantially.

Norwegian financial experts believe that increased credit growth may eventually create a situation that will lead to underwater mortgages, thus prompting foreclosures at increased levels.

Regulators are pushing for a minimum of fifteen-percent down payment in order to secure a mortgage loan. Currently, housing prices are on the rise, having gained nearly ten percent in the last month. Rising housing prices, and lax mortgage loan restrictions could potentially create an environment that leads to uncontrollable consumer debt. Banking regulators in the country believe that, if restrictions are not put into place now, consumer debt is set to double overall income in Norway by next year.

Some officials are against the idea of increasing the required down payment, however, as they believe such a restrictive standard could potentially prevent first-time homebuyers from being able to purchase a home. They also fear that such lending policy changes could severely damage the outlook of the nation’s residential real estate market.

Norway currently has the lowest unemployment rate in the continent, which has played a role in the overall increase in property values. However, the likening debt crisis that is set to sweep across the continent has many officials worried that increased consumer debt could be detrimental to the nation’s overall economy. As such, they feel that changes in lending standards are absolutely necessary.

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About Nancy Raven

Nancy is the main writer for the International section of the website. Sometimes she also helps Drew out on the Finance/Mortgage section as well.

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