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Norway sets tighter rules on residential mortgage lending

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%.