According to the Financial Sector Bank Barometer, household borrowing fell sharply in the first half of the year.
Household Demand for mortgages collapsed at the beginning of the year, according to the Financial Services Association’s recent Bank Barometer.
The index numbers describing the acquisition of one’s own home collapsed to -60 in May. Before the Russian invasion war in Ukraine, the index was 14. The last figure has been around 2013–2014. The corona pandemic also caused a sharp and rapid drop. In 2020, the index fell from 28 to -40.
The trend is similar in all categories describing household credit demand. Households are no longer as willing to borrow for business, consumer goods, investment or renovation of their own dwelling.
Russian the war of aggression against Ukraine generally weakened consumer confidence, which is reflected in the barometer results. The expectation of rising interest rates is also reflected in the results.
Do the results predict a recession?
The leading expert of the Finnish Financial Services Association Mariia Somerlan according to the situation in the economy can change quite quickly.
Two factors explain the results of the barometer. Central banks have revived the economy strongly. On the other hand, the results also reflect the Russian offensive war in Ukraine.
“Interest rates will be raised by rising consumer prices, and Russia’s invasion of Ukraine will help boost prices.”
Change may not be as dramatic as the statistics may initially seem.
Nordean economists Juho Kostiainen last year, demand for mortgages was at a record high, so it is a matter of the market returning to normal.
However, he does not expect a real collapse in the housing market, as the employment situation is good.
According to Kostiainen, the withdrawals of new mortgages in April corresponded to 2019.
Admittedly, the change may pose some challenges for housing investors, for whom rising interest rates and underutilization of housing are not pleasant phenomena.
Corona time brought a housing market boom, which was also reflected in the demand for mortgages.
According to Kostiainen, demand was so strong that loan negotiation times were not always available in banks. Now the excessive congestion has erupted.
“The tough boom in the housing market seems to be behind us and we are heading for a more normal situation.”
For example, at a time of negative interest rates and zero interest rates, there was already time to get used to it, but in reality, zero interest rates have been an exceptional time.
Bank barometer describes bank managers’ perceptions and expectations of credit demand. A total of 62 bank executives from Nordea, OP Financial Group, Danske Bank, Aktia Bank, Handelsbanken, Säästöpankki Group, POP Bank Group, Bank of Åland, Oma Säästöpankki, Hypo, SEB and S-Bank responded to the survey.
The first times in the history of the survey, none of the respondents expect demand for credit to pick up. With rising interest rates, demand for debt management flexibility has picked up slightly.
Poll According to the company, less loans were granted to companies during the spring than at the same time last year.
Russia’s hostilities and their spillover effects are affecting companies’ willingness to invest, which has declined.
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