New regulation on requirements for residential mortgage loans

The new regulation replaces the current regulation, which is set to expire at the end of 2019. The new regulation takes effect from 1 January 2020 and will be in force until 31 December 2020.

The cap on a borrower’s total debt (debt-to-income, DTI) remains at five times the borrower’s gross annual income in the new regulation. Furthermore, the caps on the loan-to-value (LTV) ratio on residential mortgage loans and home equity credit lines remain at 85 and 60 per cent respectively. The amortization requirement for loans with a LTV-ratio above 60 per cent, and the provision that lenders should make allowance for an interest rate increase of 5 percentage points when assessing a borrower’s debt-servicing ability, both remain unchanged in the new regulation.

The regulation allows a certain amount of a lender’s approved loans to deviate from the requirements in the regulation. In the new regulation, this quota remains at 10 per cent of the volume of a lender’s approved loans outside Oslo.

In December 2016, the Ministry of Finance introduced requirements in the regulation specific to Oslo. In Oslo, the quota for loans that do not meet all requirements in the regulation was reduced to 8 per cent. In addition, the cap on the LTV-ratio on secondary homes in Oslo was reduced to 60 per cent. Both requirements have been retained in the new regulation.

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 extended and amended the regulation from January 2017 and later from July 2018. The current regulation is set to expire at the end of 2019.

On 10 September 2019, the Ministry of Finance issued a public consultation on a recommendation from the Financial Supervisory Authority to amend the mortgage regulation and make it permanent. The public consultation ended on 22 October 2019.