More Home Loans Granted With Exceptions to Regulations

An increasing number of new home loans are being issued to customers who do not fully meet the requirements set by lending regulations, according to a new report from Finanstilsynet (the Financial Supervisory Authority of Norway). In the second quarter of the year, 7.7% of new home loans granted outside of Oslo were issued with exceptions to one or more of the regulatory requirements. This represents an increase of 0.5 percentage points from the first quarter. In Oslo specifically, the proportion of loans with exceptions rose by 0.8 percentage points to 6.8%. Both the capital and the rest of the country have seen the highest proportion of such loans since 2020. The lending regulations, known as utlånsforskriften, place limits on various aspects of mortgage lending. These include the maximum debt a borrower can have relative to their income, the portion of a property's value that can be financed by a loan, and how well a customer must be able to withstand interest rate increases. As a general rule, total debt cannot exceed five times gross annual income. Finanstilsynet's report indicates that the requirement for a maximum debt-to-income ratio is the one most frequently exempted. The report notes that the proportion of loans with exceptions to this specific requirement has increased over the past year. Banks are permitted to deviate from these requirements for a limited portion of their home loans. Outside Oslo, this limit is 10% of the value of new loans, while in Oslo it is 8% or up to 15 million Norwegian kroner per quarter. None of the banks included in Finanstilsynet's sample exceeded these limits in the second quarter.