– The arrows point quite clearly down for the housing market – E24

Historic interest rate jumps from Norges Bank mean that Norwegians take out smaller loans. And loan demand will probably remain low going forward, says the economist.

HIGHER INTEREST RATES: Chief economist at Handelsbanken, Marius Gonsholt Hov, explains that the increase in interest rates affects the loan debt.
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People’s loan debt in the past twelve months had the weakest growth recorded in the 2000s, recent figures from Statistics Norway show.

This is a direct consequence of Norges Bank’s interest rate hikes recently, economists note.

When the central bank raises the key interest rate, the banks follow up by raising their interest rates on mortgages.

And recently, the momentum in the housing market has slowed, notes Handelsbanken’s chief economist Marius Gonsholt Hov.

– House price growth has not only slowed down, but has shown a more marked negative trend in the last couple of months. The price drop in both September and October was clearly stronger than what is normal at this time of year, writes Gonsholt Hov in a morning report on Wednesday.

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Here they are crying out for labour. Malene’s (29) skills are in high demand.

– The arrows point downwards

Furthermore, Gonsholt Hov writes that one sees a somewhat more cautious attitude among the banks.

– Lower loan demand is also expected in the future. In other words, the arrows point quite clearly down for the housing market, he writes.

Nordea’s chief economist, Kjetil Olsen, also believes this is a direct consequence of Norges Bank’s recent interest rate hikes

– This is a consequence of higher interest rates and decreasing activity in the housing market. It is as expected. When turnover in the housing market decreases, it generates fewer loans, says Olsen to E24.

Fall in housing prices

The twelve-month growth in households’ domestic loan debt was 4.1 per cent until the end of October 2022. This is a decrease from 4.3 per cent the previous month, writes Statistics Norway.

In November, Norges Bank raised the key interest rate by 0.25 percentage points to 2.50 per cent. This is the highest interest rate level since 2009.

In October this year, house prices fell by 1.9 per cent nationally. Adjusted for seasonal variations, prices fell by 0.8 per cent. Oslo had a seasonally adjusted decrease of 1.9 per cent in October, which is the weakest in the country. In nominal terms, prices in the capital fell by as much as 3.2 per cent.

– The price drop is mainly due to the fact that the interest rate has been raised sharply throughout the year, noted Eiendom Norge when the figures were published.

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Nejra Macic, chief economist at the Prognosesenteret, says the reinforcing effect between interest rates and the eagerness to borrow, and the consequences for the housing market, are well known.

The impact on the housing market is normally strongest in the largest cities.

– Oslo is Norway’s most interest-rate-sensitive housing market, with the highest loan-to-value ratio and debt ratio. There is generally a distinction between city and countryside, partly because there are more young people in the cities, says Macic.

Higher mortgage interest

DNB and Nordea were among the first to raise mortgage interest rates after Norges Bank’s latest rate hike.

Both banks set the mortgage interest rate by 0.25 percentage points.

– Based on Norges Bank’s decision to raise the key interest rate by 0.25 percentage points at the interest rate meeting on 3 November, DNB has decided to increase the interest rate on mortgages and deposits by up to 0.25 percentage points, says Ingjerd Blekeli Spiten, the head of personal markets at DNB, in a message in connection with the interest rate increase.

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