More housing loans than ever before
Prices increase as interest rates make borrowing more attractive
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Finns have taken out a record number of housing loans this year. The greatest surge was in June, when a total of EUR 1.9 billion in new loans were borrowed.
Although the pace of borrowing for new homes usually eases after June, this year EUR 1.5 million in new loans were taken out in July - more than in any month in any previous year.
Households with a strong faith in their own finances who want to improve their quality of living are increasingly taking out large long-term loans. High rents also serve as an incentive for young people to borrow and buy.
Interest rates have dropped to record lows. The interest on new housing loans is 2.84%. Most commonly, the loans are fixed to the 12-month Euribor rate.
In July Finns had a total of EUR 45.2 billion in outstanding housing loans. Heikki Koskenkylä of the Bank of Finland notes that in countries with a real housing bubble, borrowing to buy a home has grown even faster than in Finland.
Housing prices have been rising sharply in the United States, Britain, Ireland, The Netherlands, Spain, and Australia.
Although the pace of the rise in housing prices has been fairly moderate in Finland, Koskenkylä is worried that the rate of increase has continued unabated.
The rate of household indebtedness has also been rising for ten years. Now the debt to income ratio of Finnish households is at the same level as it was before the banking crisis and recession of the 1990s.
However, the costs of servicing the debts is much lower in proportion to income than it was before the recession. Before the banking crisis, interest rates absorbed about 10% of family income. Now the average is 2.5%.
Nordea Bank calculates that Finns are generally in a very good position to buy homes.
However, the situation varies from one community to another. Residents of Helsinki in particular are in a more difficult spot than others.
Although interest rates have fallen and income has grown, increased earnings tend to be spent on the financing of increasingly expensive housing. The price of apartments in Helsinki rose an average of 4.2% from April to June this year.
Helsingin Sanomat
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| 9.9.2005 - TODAY |
 More housing loans than ever before |
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