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 House prices have jumped 7.5 percent in the last 12 months and the
ratio of household debt to income is above 200 percent, one of the
highest levels in Europe.
"We want to put in place rules that will allow the construction of
more houses that cost less," Finance Minister Siv Jensen told a news
conference, adding that the new policy framework would contribute to
a "sound and stable" economy.
"I am confident that Norwegian lenders are prudent in their
individual credit assessments, but the strong growth in lending and
household indebtedness can be a risk factor for the Norwegian
economy," she said.
Fearing a housing bubble and financial instability, Norway's bank
regulator in March proposed tighter mortgage regulations that would
close loopholes that allow banks to deviate from lending guidelines.
It also called for more strenuous stress tests on borrowers.
Among its proposals, the Financial Supervisory Authority (FSA) said
the maximum loan to value ratio for a mortgage should remain at 85
percent and that the room to deviate from this rule should be
sharply reduced.
Jensen said the government would stick to the 85 percent rule, but
said up to 10 percent of a bank's new loans would be allowed to
deviate from the norm.
The regulator had also said it planned to require banks to test
whether a borrower can manage a six percentage point rise in
interest rates, above a previous test of five percent, but Jensen
said she would keep the rule at five percent.
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The FSA had also asked for new rules requiring annual installment
payments from the first year on all mortgages with a loan-to-value
ratio above 65 percent. The government said it would set the bar at
70 percent.
Norwegian economic growth, hammered by a sharp fall in global oil
prices, is expected to halve this year to just over 1 percent, which
will probably persuade the central bank to cut interest rates.
(Reporting by Camilla Knudsen, Terje Solsvik and Joachim Dagenborg,
editing by Stine Jacobsen and Gareth Jones)
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