Niklas Wykman recently received an investigation that proposed easing of both amortization requirements and loan ceilings.
Now he writes in a comment on the government's website that it may be risky to meet the investigators' demands and change the first amortization requirement introduced in 2016.
This means that households borrowing more than 50 percent of the property's value must amortize at least 1 percent of the original loan each year. Those borrowing more than 70 percent must amortize at least 2 percent.
"This requirement is not as questioned, while it affects more borrowers. Here, one can ask oneself if the arguments weigh equally heavily. Making large changes to the regulations also entails a risk," Wykman writes.
On the other hand, he does not raise any objections to the investigation's proposal to abolish the tightened amortization requirement, which means that some households must amortize 3 percent, and to raise the loan ceiling from 85 to 90 percent.
Wykman writes that changes to amortization requirements and loan ceilings affect both mortgages and housing prices, and that large changes can therefore have significant effects.
"It is important to consider in an environment with rapidly falling mortgage rates – a development that facilitates for many who have already taken out mortgages, but will likely also contribute to higher housing prices," he writes.
The government's investigators propose that the loan ceiling be raised from 85 to 90 percent and an amortization requirement of 1 percent for mortgages exceeding 50 percent of the property's value.
Furthermore, a new debt-to-income ratio ceiling is proposed, which means that it should not be possible to borrow more than 5.5 times the annual gross income, with room for banks to make exceptions for 10 percent of the loans.
Today's loan ceiling was introduced in 2010 and means that households are not allowed to borrow more than 85 percent of the property's value. It was complemented in 2016 by an amortization requirement, which means that households borrowing more than 50 percent of the property's value must amortize at least 1 percent of the original loan each year. Those borrowing more than 70 percent must amortize at least 2 percent.
The amortization requirement was tightened in 2018 with a rule stating that households with mortgages larger than 4.5 times gross income should amortize an additional 1 percent beyond the first amortization requirement.
Source: Financial Supervisory Authority
