Banks warn of tighter lending and higher interest rates

Norges Bank headquartersNorges Bank headquarters.

Banks will tighten credit standards for households ahead. At the same time Norwegians should prepare for higher lending rates.

It was revealed in Norges Bank’s lending survey for the fourth quarter of 2016.
– Banks have announced that they will tighten credit standards for households in the first quarter of 2017 as a result of changes in mortgage regulation, Norges Bank wrote on Thursday.
The regulation stipulates stricter capital requirements on loans to secondary residences in Oslo. After the new regulation, the requirement will increase by 40 percent. In the rest of the country the claim remains at 15 percent. The government also introduced a requirement that customer’s total loans should not exceed five times their gross income.
Banks’ credit standards for enterprises is expected to be unchanged in the first quarter.
The Bank Lending Survey also shows that household demand for mortgages continued to increase slightly in the last quarter.
Against higher interest rates
Banks did not report on changes in credit standards for households in the fourth quarter, but will now therefore tighten them.
– Almost all banks are justifying mitigation with changes in mortgage regulations that apply from the first quarter of this year, Norges Bank writes.
Despite a historically low base rate of 0.5 percent and forecast that interest rates will remain low for a long time, mortgage rates have crawled upwards in recent months.
In a lending survey for Norges Bank, banks reported that their lending margins on loans to households fell slightly in the fourth quarter.
– In the first quarter Banks expect higher lending margins and lending rates. Financing costs, competition and regulatory changes were cited as explanatory factors, writes the central bank.
Source: NTB scanpix / Norway Today

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