(Adds finmin, economists, home builders' association)
OSLO Dec 14 Norway's government will impose
extra restrictions on banks' mortgage lending from 2017, the
finance ministry said on Wednesday, to try to address a
potential house price bubble, with a particular focus on reining
in the Oslo market.
House prices rose roughly 12 percent this year, driving up
the consumer debt-to-income ratio and feeding regulators' fears
that the economy may suffer longer term.
Among the new rules, borrowing will be capped at less than
five times a householder's income and mortages will run over a
shorter period of time, the ministry said in a statement.
Banks will have leeway of 10 percent on loan-to-value
restrictions, it said, whereas the banking regulator had argued
there should be few or no exceptions.
In Oslo, that limit will be 8 percent and anyone buying a
second home must have at least 40 percent equity financing,
against just 15 percent for those buying primary homes.
Ole Haakon Eek-Nielsen at Nordea Markets said it was
difficult to forecast what impact the new rules would have.
"If they manage to limit appetite from (property)
speculators it will mean a lot for prices but then again you
could assume those buyers have a lot of equity," he said.
As demand has persistently outstripped supply, Norwegian
housing prices have been rising sharply for years, particularly
in and around Oslo. But opinion differs on the effect of the new
Norwegian Home Builders Association chief executive, Per
Jaeger, said the new rules could limit demand for housing in the
capital but argued that the solution was for authorities to
boost supply by allowing more building.
However, SEB economist Erica Blomgren said a fall in prices
would not necessarily be the outcome in any case.
"The difference from current rules are not that big...," she
said. "It may help to curb housing prices, especially in Oslo,
but nothing indicates that these rules will lead to a decline in
The new regulations take effect from Jan. 1 and are expected
to be in force until at least mid-2018.
(Reporting by Terje Solsvik Editing by Ole Petter Skonnord and