Most common housing loan payback period now 25 years
|
|
|
Those with housing loans remain in debt longer than before. Whereas a year ago the most common payback period for a housing loan was 20 years, it has increased to 25 years this spring.
The average repayment time is 19 years, but a quarter of those who have taken out a housing loan in the last two years have opted for a payback period of 25 years.
A tenth of those with a housing loan chose a 30-year repayment period, whereas one half a percent preferred to remain in debt for 40 years.
The reason why the repayment periods have lengthened is the rise in interest rates as well as the noticeable increase in the amounts being borrowed.
As housing prices keep on climbing, the home-buyers have to resort to taking out ever more substantial loans.
In order to reduce the amount of money to be paid out monthly, people opt for longer repayment periods.
The increase in interest rates that has continued for a couple of years now has also had an impact on the length of the payback periods.
Nowadays many opt for loans that automatically lengthen the payback period if the interest rate rises, keeping the monthly payments unchanged.
According to a Federation of Finnish Financial Services (FK) report, the Finns increase the amount that they borrow year after year. In a year the average amount of borrowing has increased by six thousand euros to EUR 71,500. In a period of ten years, the average amount of debt has increased by over EUR 50,000.
The greatest increase has taken place among those with large loans, over EUR 150,000. Already 8.8 per cent of the 1.2 million Finns with housing loans belong to this group.
For those living in the capital area, the housing loans are notably larger than elsewhere in the country. The loans taken out by the Greater Helsinki area residents have also grown in size faster than in the rest of Finland in recent years.
Families with small children have the largest housing loans. Of various age groups, the 29-39-year-olds have the greatest debt-burden.
Once over 40, the amount of bank accommodation will gradually start to subside.
In other words, the people with the most housing debt are the capital area's 30-somethings with children.
According to the FK director Kaija Erjanti, though, one does not have to be overly concerned about this group.
“A large amount of debt concentrates on certain groups, but those with substantial loans to pay back are also generally well-paid”, Erjanti says.
But there are exceptions to the rule. Eight per cent of those with housing loans spend 40 percent of their net income to reduce the loan balance.
On average, Finns spend 28 per cent of their income to repay their loans. The percentage has remained the same despite the more hefty loans being taken out.
This is because the repayment periods have also lengthened. People want to have money for other things as well, besides reducing the amount they have borrowed.
According to the FK Special Adviser of Financing Ulla Halonen, what is also notable is the fact that today more than half of those taking out loans also have savings and investments.
“It is a safety net against sudden interest hikes”, Halonen explains.
According to the study, those with the largest and most recent loans are also best prepared for an interest rise.
Helsingin Sanomat
|
| 16.5.2008 - TODAY |
 Most common housing loan payback period now 25 years |
|
