The country has a strict set of lending regulations that banks need to account for when offering customers mortgages.
Among these are mortgage applicants only being allowed to borrow the equivalent of five times their income minus any existing debts and a minimum 15 percent deposit on house loans.
Banks can then set their own requirements on top of these minimum requirements. For example, one of Norway’s largest banks, DNB, has previously told The Local that it typically asks foreigners for a 25 percent deposit.
READ MORE: What foreign residents in Norway need to know to get a mortgage
Norway’s latest set of requirements expires at the end of the year, but broadcaster TV 2 reports that they could be softened to make it easier for consumers to obtain mortgages.
The Financial Supervisory Authority of Norway, which supervises banks and other financial institutions, will publish its advice for what the government should do with lending regulations.
TV 2 reports that the Ministry of Finance said the government’s decision on what to do would be published towards Christmas.
Any changes proposed by the government would come into effect from the new year.
Jeanette Fjære-Lindkjenn, a PhD student at the Housing Lab at Oslo Met and who has previously worked as an economist for NB Markets and Norges Bank, told TV 2 that some form of change to the regulations was expected.
“I think it is perhaps more realistic that there could be some kind of softening or more flexibility, which might mean that these costs (of getting a loan) could be a little less,” she told the broadcaster.
Fjære-Lindkjenn said that the introduction of exceptions to the equity requirement for households with good finances would be one possible solution. She said in return, houses with lower equity would initially make larger monthly payments.
Her and others’ research at the Housing Lab at Oslo Met has examined how mortgage regulations affect house prices and debt growth, households’ financial vulnerability, and banks’ losses related to lending.
The research was uncertain whether the current regulations increased financial vulnerability for households.
The current 15 percent requirement could be a double-edged sword, though, Fjære-Lindkjenn said. This is because the 15 percent figure stopped people from taking on bigger loans than they could handle, but on the other hand, the high equity requirement leaves consumers with little in the way of savings after buying a house.
Should the rules be relaxed, Fjære-Lindkjenn expected a short-term and moderate increase in housing prices.
“The research we have now shows that the effect on house prices has appeared to be quite short-lived and moderate. I believe that in the long term, there will be other more important drivers for house prices,” she said.
Norway’s lending regulations were last relaxed in 2022 when the government reduced the interest rate changes applicants would need to tolerate from five percent to three percent.
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