Nordea: Housing loan repayment capacity still good in Finland
Housing loan repayment capacity among Finnish households remained good in the
last quarter of 2009. At the end of the review period, Nordea's index value
decreased to 31.0, in contrast to 31.3, according to statistics covering the
third quarter of 2009. The index value was the lowest since 1989 when Nordea
started the index calculation. In the Greater Helsinki Area and in Kotka, Lahti,
Pori and Rovaniemi the index did not improve further, but the index value rose
slightly.
Housing loan repayment capacity was lowest in Helsinki and highest in Kajaani.
The monthly housing loan servicing costs of a household in Helsinki rose by EUR
20 to EUR 769. The monthly cost of a household in Kajaani decreased by EUR 6 to
EUR 292.
Housing prices in the whole country increased slightly. The nationwide average
home price is EUR 154,906. In Helsinki it is EUR 257,894, whereas the least
expensive homes are in Kajaani, at the price of EUR 97,997.
Today's record-low interest rates make housing loan servicing significantly
easier. During the review period, the average interest rate continued to
decrease from 2.3 per cent in the third quarter of 2009 to 2.0 per cent.
- As the index value is still based on the currently low interest rate level,
the situation for homeowners is less favourable than it would seem. Moreover,
the index has not decreased further in the Greater Helsinki Area. In central
Helsinki the figures are not nearly the best ones, says Nordea's Economist Reijo
Heiskanen.
Homeowners' behaviour appears strongly influenced by the cost of monthly loan
payments, hence increased demand for housing loans towards the end of the year.
The lower costs resulting from currently low interest rates should not, however,
influence decision-making.
- The home purchase plans and loan servicing calculations should be made on the
basis of an interest rate at least a few percentage points higher. At the
prevailing interest rate level, a new housing loan should on no account be
dimensioned to the upper level of the consumer's repayment capacity. We also
recommend an interest rate cap while interest rates are still low, says Anu
Numminen, Nordea's Private Economist.
Monthly loan
Home price servicing cost Index Q3/2009 Index Q4/2009 Change
All of Finland 154,906 462 31.3 31.0 -0.3
Helsinki 257,894 769 44.3 44.4 +0.1
Espoo 224,026 668 36.7 37.1 +0.4
Porvoo 145,229 433 32.3 28.7 -3.6
Vantaa 180,710 539 34.2 34.3 +0.1
Tampere 156,826 467 31.7 31.2 -0.5
Hämeenlinna 131,942 393 28.4 27.9 -0.5
Kuopio 131,251 391 28.6 27.3 -1.3
Turku 131,866 393 28.2 27.5 -0.7
Joensuu 127,718 381 28.0 27.7 -0.3
Mikkeli 120,346 359 28.0 26.6 -1.4
Lappeenranta 121,421 362 27.7 25.7 -2.0
Jyväskylä 132,250 394 27.0 26.7 -0.3
Vaasa 121,498 362 24.5 24.2 -0.3
Oulu 119,962 358 25.3 24.2 -1.1
Lahti 122,189 364 25.8 26.1 +0.3
Seinäjoki 111,974 334 24.7 24.0 -0.7
Kokkola 109,440 326 24.8 23.1 -1.7
Kotka 106,906 319 21.5 21.9 +0.4
Rovaniemi 110,822 330 21.9 23.2 +1.3
Pori 100,301 299 20.5 21.1 +0.6
Kajaani 97,997 292 21.1 20.4 -0.7
In Nordea's index housing loan costs are calculated for a surface area of 76.8
square metres, which, according to Statistics Finland, is the average size of a
home in Finland. The loan taken out to purchase a home is 70 per cent of the
purchase price and the loan period is 25 years.
The basis for the index is that loan costs, excluding tax deductions, should not
exceed 25 per cent of a household's gross income. If the index is 100, the
household spends 25 per cent of its gross income for loan servicing. The smaller
the figure, the better the household's ability to service the housing loan
needed for the exemplary home of the index at present.
For further information:
Anu Numminen, Private Economist, +358 9 165 88218, +358 50 597 0447
Reijo Heiskanen, Economist, +357 9 165 59942, +358 50 568 6623
[HUG#1390011]
