New lending regulation

The Ministry of Finance has adopted a new regulation on requirements for new residential mortgage and consumer loans.

The new regulation will replace the current residential and consumer credit regulations, which are set to expire at the end of 2020. The new regulation takes effect from 1 January 2021 and will be in force until 31 December 2024. The regulation will be evaluated in 2022.

The caps on the loan-to-value (LTV) for residential mortgage loans and home equity credit lines remain at 85 and 60 per cent, respectively. The cap for residential mortgage loans for secondary dwellings in Oslo will still be 60 per cent. The cap on debt-to-income (DTI) stays at five times the borrower’s gross annual income. Furthermore, the new regulation keeps the provision that lenders should make allowance for an interest rate increase of 5 percentage points when assessing debt-servicing ability, as well as the amortization requirements for all consumer loans and for residential mortgage loans with an LTV ratio above 60 per cent.

The regulation allows a certain amount of a lender’s approved loans to deviate from the general requirements. These quotas are unchanged in the new regulation. For residential mortgage loans, the quota is 10 per cent of the volume of each lender’s loans outside Oslo, and 8 per cent in Oslo. For consumer loans the quota is 5 per cent.

Background

In June 2015, the Ministry of Finance adopted a regulation on requirements for new residential mortgage loans. The regulation was based on existing mortgage lending guidelines from the Financial Supervisory Authority. The regulation took effect from 1 July 2015 and expired 31 December 2016. The Ministry of Finance has extended and amended the regulation on three occasions. In February 2019, the Ministry adopted a similar regulation on requirements for consumer loans. The current regulations are both set to expire at the end of 2020.

On 29 September 2020, the Ministry of Finance issued a public consultation on a recommendation from the Financial Supervisory Authority on a new lending regulation that would replace and amend current regulations. The public consultation ended on 10 November 2020.