Rising interest rates, accelerating inflation and the resulting rise in housing costs are straining the wallets of homeowners in particular, Nordea Bank says in its recent housing market review.
According to the consumer price index, housing costs rose by 7.3 per cent year-on-year in February.
"The price of electricity has risen by an average of 30 percent. The development of heat and water prices has so far been more moderate, but has also risen faster than in previous years," says Nordea’s economist Juho Kostiainen in a press release on Wednesday.
In addition to heat and electricity, the prices of maintenance and repair construction have also risen, which has caused significant upward pressure on maintenance fees for owners of housing companies.
Kostiainen points out that increased maintenance fees primarily affect homeowners, but also affect investors’ income, as increased costs may not be passed on due to weaker demand for rental housing.
Rising interest rates will also soon start raising costs for mortgage borrowers. The general reference rate for mortgages, the 12-month Euribor, is expected to rise above zero this year.
"Although the net indebtedness of Finnish households has not increased in recent years, changes in the reference rate affect the available funds of households," warn Jussi PajalaCEO of Nordea Mortgage Bank.
More interest rate risk than elsewhere in the euro area
Finnish mortgages are almost entirely floating rate. This means that most face a higher risk than the rest of the euro area, where more than 80% of mortgages are fixed-rate.
Nordea estimates that housing sales have recovered rapidly since the brief recession in Ukraine. The number of loan applications has already returned to normal spring levels.
However, the rise in house prices is expected to remain modest and the warming in the market caused by the coronavirus pandemic seems to have passed.
Source: The Nordic Page
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