The residential mortgage lending survey 2020 shows that a large and increasing proportion of new loans secured on residential property (residential mortgages) is taken out by borrowers with high total debt relative to income (debt-to-income/DTI ratio). 45 per cent of the loan volume in this year's survey went to borrowers whose debt exceeds four times annual income. Many borrowers also take out residential mortgages that represent a large share of their property’s appraised value (loan-to-value/LTV ratio). Compared with 2019, 2020 saw a further rise in the proportion of new loans granted to borrowers whose DTI and LTV ratios are both high. The average DTI ratio of borrowers who take out new residential mortgages rose to 338 per cent in this year's survey.
An increasing proportion of new residential mortgages is taken out by borrowers with high total debt (residential mortgages and other loans) relative to gross annual income (DTI ratio). In this year's survey, 45 per cent of new loan volume went to borrowers with a DTI ratio above 400 per cent, while 27 per cent went to borrowers with a DTI ratio above 450 per cent. Many borrowers who take out new residential mortgages have high consumer debt.
The average debt of borrowers who took out new residential mortgages represented 338 per cent of gross annual income. This is 4 percentage points higher than in 2019 and 20 percentage points higher than in 2016, i.e. before the DTI ratio requirement was laid down in regulations as of 1 January 2017.
The average LTV ratio was 65 per cent for new instalment loans in this year's survey, which is at the same level as in 2019, but slightly higher than in previous years. With respect to new lines of credit, borrowers’ average LTV ratio was 47 per cent, 1 percentage point higher than in 2019.
“This year's residential mortgage lending survey shows that a large and increasing proportion of new loans is taken out by borrowers with high total debt. Many borrowers have both high total debt relative to income and residential mortgages representing a large share of their property’s appraised value. This gives rise to concern, as these borrowers may be particularly vulnerable to a lapse in income, increased interest rates or a fall in house prices,” says Per Mathis Kongsrud, Deputy Director General, Digitalisation and Analysis.
Loans to first-time homebuyers accounted for 10 per cent of the total volume of new instalment loans in this year's survey, which is slightly higher than last year. First-time homebuyers accounted for 23 per cent of the number of instalment loans that fell short of one or more of the requirements of the residential mortgage lending regulations.
Many first-time homebuyers are close to the maximum permitted DTI ratio and/or LTV ratio. About half of the first-time homebuyers in the survey had an LTV ratio between 80 and 85 per cent after taking out the mortgage, while 19 per cent of the first-time homebuyers had an LTV ratio above 85 per cent.
About the survey
Finanstilsynet’s residential mortgage lending survey is carried out each year and includes a selection of new loans secured on residential property. In the autumn 2020 survey, 30 of the largest (Norwegian and foreign) banks reported data on close to 8 000 new instalment loans and 4 000 new lines of credit secured on residential property granted after 1 August 2020.