‘One in three’ Norwegian homes worse off than at start of 2022

The proportion of households in Norway that are struggling to make ends meet is increasing, according to new analysis.

'One in three' Norwegian homes worse off than at start of 2022
An increasing number of Norwegian households are struggling with living costs. Photo by Jonas Leupe on Unsplash

In a new report, analysis institute Consumption Research Norway (SIFO) at Oslo Metropolitan University concludes that one in three homes in Norway have worse finances now than they did in January this year.

The ability to pay bills, interests and loan repayments are meanwhile cited as a problem for one in four of all households.

“We are in an expensive time, which has been building up since August last year and got stronger during the winter. We are now talking about higher prices for energy, fuel, food and higher interest,” researcher Christian Poppe told broadcaster NRK.

“The sum of this has impacts unequally and some people are hit extra hard,” he said.

Two thirds of people who spoke to researchers for the report said that they had been forced to rein in spending due to higher living costs.

Cutbacks reported include reduced use of electricity, less car use and less social activity.

21 percent said that they had reduced their food budget to make ends meet, a number that increases to 60 percent amongst those who said they had been hardest-hit.

“There are isolated warning signs in this report and the proportion of people saying they have to save on their food budget is high,” Poppe told NRK.

“There is a limit to how little you can spend on food and in some cases people already don’t have enough money for food,” he said.

Researchers spoke to a representative selection of Norway’s 2.1 million households to produce the report, which shows a significant increase in economic stress at homes compared to a similar study from July 2021.

66 percent said they are finding it difficult to pay energy bills, with those in the south of Norway more severely affected than those in the north.

Energy prices in southern Norway have been up to 131 times higher than those in the south in recent weeks, according to Nordpool figures.

The consumer price index, a measure of the cost to households of everyday goods, has increased by 6.3 percent since last summer, NRK writes.


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Norway considers stricter rule on debt limit for mortgages

The Financial Supervisory Authority of Norway (Finanstilsynet) wants to reduce the total amount of debt permitted for mortgages to be 4.5 times the income of the borrower. Critics say the change could make it too difficult to be approved for a mortgage.

Norway considers stricter rule on debt limit for mortgages

The finance authority, a government agency that has the remit of promoting financial stability, has recommended new borrowing regulations to Finance Minister Trygve Magnus Slagsvold Vedum. The regulations could come into effect on January 1st next year.

The headline change among the recommendations tabled by the Financial Supervisory Authority is a reduction from the total debt permitted for mortgages, from the current 5 percent of income to 4.5 percent.

The recommendations were reported on Monday by Norwegian media including NRK and E24.

Government regulations on lending determine who banks can approve for mortgages and how much lenders can borrow.

Specifically, the regulation change would reduce the total debt incurred by the lender on drawing the mortgage from 5 percent of gross annual income to 4.5 percent.

In addition, existing loans such as on cars or second homes would count towards the total debt of the lender.

The finance authority based its decision on what it sees as increased risk of financial instability compared to the situation when the existing regulations were set, E24 writes.

Criteria in the current regulations should be “tightened somewhat to prevent accumulation of debt in vulnerable households,” the authority wrote in its reasoning for the recommendations.

Norges Bank, the Norwegian central bank, has previously stated that current regulations can be continued, while the interest organisation for real estate businesses, Eiendom Norge, called the recommendation “odd”.

“It’s extremely odd that they are coming out with this now. It involves a very severe restriction of the opportunity to loan,” Eiendom Norge CEO Henning Lauridsen told E24.

“We think the entire regulation should be set aside,” he added.

The restriction on total debt as a proportion of income was first introduced by Norwegian regulators in 2015 as a measure to keep rising house price in check. It has since been extended and the original rules were tightened in 2017.

Norway’s central bank raised interest rates to 2.25 percent in September. The interest rate was 0.5 percent when the current regulations took effect in 2017.

“There is, in practice, no need for loan regulation with interest at the level we have now. The interest rate increase will put loan interest rates somewhere between 4 and 5 percent, which in itself will further decrease debt growth,” Lauridsen told E24.

The authority said that regulation of borrowing should not be based on expectations of market behaviour alone.

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