The Finnish dream is still an owner-occupied home. One fourth of the respondents to the survey are considering changing homes next year.
- Owner-occupation continues to be Finns' dream. I was a bit surprised at how strongly young people, too, are in favour of owner-occupation, says Olli Kärkkäinen, Nordea's Private Economist.
Despite the record-low interest rate level, there are no signs of any housing bubble in Finland.
- In our view, there is no need to be worried about a housing bubble in Finland. The housing loan portfolio has grown at a calm pace, although the interest rates of new housing loans are record-low. Moreover, housing prices have increased very moderately, whereas the rent level has risen considerably faster than housing prices, says Jussi Mekkonen, Nordea's Deputy Head of Banking Finland.
Finns are against higher living expenses – the cost pressure of increased regulation focuses on new housing loans
The respondents' living expenses are already at maximum. Most Finns spend 300 to 900 euros on living expenses every month, and this is the maximum level they can afford.
- Almost half of the respondents said that they are not able to pay any higher living expenses. Illness and the threat of unemployment are their worst fears. If needed, however, they could cope with higher living expenses by saving on other expenditure, says Olli Kärkkäinen.
Increased regulation may raise housing loan servicing costs. Although the increase in costs due to regulation mainly results from existing loans, the costs can, however, only be allocated to new housing loans.
- The housing loan margin is the only cost of housing on which the service provider cannot influence during the agreement period. This is why an overwhelming proportion of the costs arising from increased regulation affects new housing loans, says Jussi Mekkonen.
Interest rates are expected to remain low
Finns do not believe interest rates would rise within the next couple of years. Two out of five borrowers expect the total interest on their housing loan be 1.5–3% and one third expect it to be less than 1.5% after three years. The majority of young borrowers cannot estimate the interest rate level at all.
- One fourth of the Finns with housing loans are not prepared for a rise in the interest rates in any way, although they maybe should. Women are slightly better prepared for increased interest rates than men. The majority of the borrowers aged 18–25 could not give any estimate on what level the interest rates on housing loans would be in the near future. I find this a bit worrying, says Olli Kärkkäinen.
The survey was conducted as an Internet panel by TNS Gallup on commission by Nordea between 8 February and 15 February 2016. The responses have been weighted taking into account the respondent's age, sex and place of residence. The number of Finnish respondents between the ages of 18 and 65 was 1,016.
For further information:
Jussi Mekkonen, Deputy Head of Banking Finland, tel +358 50 368 7029
Olli Kärkkäinen, Private Economist, tel +358 40 735 6030