The Norwegian finance ministry imposed tougher rules on residential mortgage lending, effective Jan. 1, 2017.
The new regulation leaves the cap on the loan-to-value ratio on residential mortgage loans at 85%, but, in accordance with the Financial Services Authority's recommendation, the maximum loan-to-value ratio for home equity credit lines stands lowered to 60% from 70%. The requirement on amortization of repayment loans will now apply to all loans with a loan-to-value ratio higher than 60%, compared to 70% currently.
The new rules also warrant that banks ensure that a borrower's debt is limited to 5x gross annual income.
As under the current rules, banks have flexibility on meeting the requirements on at most 10% of lending volumes outside Oslo. In the capital city, the flexibility is capped at 8% and the loan-to-value ratio on secondary homes at 60%.