Brotherus pointed out to the newspaper that the impact on prices could ultimately be quite small, as institutional investors and high-income house buyers could offset the decline in demand caused by the roof. The ceiling can also curb housing production in remote urban areas and thus limit its impact on housing prices.
“It wouldn’t be a good change because it slows down urbanization and prevents people from living where they want to,” he said, noting the impact on housing production.
His rating agreed Timo Metsola, CEO of Vuokraturva.
“Whatever the solution, people live close to downtown areas. It is more a question of the proportion of people living in rental apartments and owning houses, ”he told Helsingin Sanomat.
Marja NykänenThe Deputy Governor of the Bank of Finland acknowledged that the ceiling could have an effect on house prices by restricting loans to potential buyers.
“The bigger the loans, the more you can pay for the house,” he summed up. “If there was some kind of backstop in over-indebtedness, it would contribute to more stable price developments. The debt ceiling could indirectly have a positive effect on house prices.”
In June, the STT announced that the government was considering a proposal to limit total household debt to 500 percent of gross annual income to increase household debt. The proposal would allow banks and credit institutions to deviate from the limit by up to 15% of new loans.
Both Brotherus and Metsola questioned the merits of the proposed maximum debt ratio.
“The increase in late payments and growing debt cannot be blamed on ordinary mortgages, through which indebtedness is responsible and even,” Brotherus explained to Helsingin Sanomat.
Although the cap is unlikely to have an impact on mortgages at low house prices, it may limit the opportunities for potential buyers, especially in the Helsinki metropolitan area, but also in Tampere and Turku.
“Sounds like a weird goal of preventing low-paid people from buying houses in areas where the housing market is safest and most stable,” Brotherus said.
Metsola swims the opportunity to introduce a different roof across Finland. In his view, the ceiling can be 600 percent of gross annual income in the metropolitan area and 450 percent elsewhere in the country.
“If you also gave the banks a chance to make exceptions, we would be close to all the building blocks,” he estimates.
The Bank of Finland has expressed its support for the household debt limit, considering that it would enable households to better prepare for recessions and financial difficulties caused by temporary or permanent layoffs.
“The proposal would enable loans to be granted in much the same way as today,” Nykänen analyzes. “It is not in our interest to limit the functioning of the housing market. The goal of the debt ceiling is to prevent excessive growth in household indebtedness and over-indebtedness.”
The Bank of Finland, he revealed, has calculated that a ceiling of 500 per cent annual income would not have a significant impact on the mortgage, as lenders already have to ensure the applicant’s ability to repay under a stress test using a 25-year loan and a 6 per cent interest rate.
– The trend is for household indebtedness to increase, loan repayment periods to lengthen and mortgages for new residential buildings to rise. The tools must be introduced before the problems become too great and the debt ceiling will not have a significant effect on lending, ”Nykänen emphasized.
Calculations by the Bank of Finland and the Financial Supervisory Authority (Fiva) show that last year more than a quarter (28%) of mortgage loans were granted to households with a debt ratio of more than 450 per cent. The new loan raised the 21 per cent stake in the mortgage to over 500 per cent.
A political decision on the debt ceiling has not yet been made. prime minister Sanna Marin (SDP) and the Minister of Finance Annika Saarikko (Center) both expressed skepticism about the tool in a municipal election debate organized by Helsingin Sanomat last week.
Aleksi Teivainen – HT
Source: The Nordic Page