Banks Fiva assesses the need to tighten banks’ mortgage lending

The Financial Supervision Authority maintains its macroprudential policy unchanged but assesses the need to tighten loan ceilings or banks’ capital requirements.

Financial supervision (Fiva) says it is “closely” monitoring developments in the housing market and household indebtedness and urges banks to “pay particular attention” to the borrower’s solvency.

On Thursday, the banking supervisor did not tighten its macroprudential policy, ie it kept the mortgage loan ceiling and banks’ capital requirements unchanged.

Fiva notes that housing sales and mortgage lending picked up at the end of last year, while household debt continued to grow relative to disposable income.

“In this situation, Fiva pays special attention to recent developments in mortgage lending and closely monitors the functioning of the housing market and household indebtedness. Based on these developments, the need to further tighten macro-prudential requirements to mitigate risks will be assessed, says Fiva’s Chairman of the Board Marja Nykänen in the bulletin.

Fiva as part of the interest rate recovery in June last year, restored the loan ceiling to 90 percent for non-first-time home buyers. Thereafter, the share of credit ratios of more than 85% of the euro amount of non-primary mortgages increased to the same level as before the tightening of the loan ceiling in 2018.

According to Fiva, large loan ratios for first homes, more than 90%, have also become more common. They now account for almost a quarter of new borrowing.

Also, longer-than-usual mortgages became more common. Household debt as a share of disposable income rose to its new record of 131 per cent in the third quarter of last year.

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