Yle poll: Nearly half in Finland want a household 'debt ceiling' established

The government is looking to introduce measures aimed at tackling the increasing levels of household debt in Finland.

The number of Finnish in debt is rapidly increasing, with the increase in consumer credit causing particular concern. Image: Markku Pitkänen / Yle

Poll results show that 42 percent of Finnish residents would support the introduction of a debt ceiling, while 47% are opposed to the idea, according to results of a survey commissioned by Yle about household debt.

Debt ceiling legislation being mulled by the government would affect household mortgages, housing company loans, and consumer loans, and while it would not prevent borrowing, it would limit the amount of a loan an individual can take in the event of a payment default.

The idea of setting up debt ceilings has become a hot topic in the debate over the increasing rate of personal debt problems in the country. The Bank of Finland proposed that the country should implement debt ceilings at the beginning of this summer.

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Image: Mikko Airikka / Yle

While roughly half of those surveyed favoured the debt ceiling and half did not, 11 percent of respondents were unwilling or unable to express their views. This group included a particularly large number of 15-24 year olds, many of whom are still relatively inexperienced in lending.

The results showed that support for a debt ceiling increased among older age groups. Those under the age of 49 with the most loans had a negative attitude towards a debt ceiling. People over 50, on the other hand, were more supportive of the measure.

Yle took to the streets of Helsinki to ask people for their opinions.

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Mikael Friskopf, Helsinki: "I don't have a direct position. If you can't take care of yourself, it's good to have someone take care of you. But a debt ceiling could limit the opportunities for some groups of people to buy - and to plan their lives." Image: Markku Pitkänen / Yle

Housing company loans increasingly a source of debt

The level of Finnish residents in debt grew rapidly during the 2000's, although the pace has slowed somewhat in recent years.

The main sources of debt are mortgages, consumer loans and, increasingly, housing company loans. That's why the Bank of Finland has called for a broad debt ceiling.

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Source: Statistics Finland (Tilastokeskus) Image: Mikko Airikka / Yle

Currently, the only available debt ceiling is related to home loans. Mortgage loans are granted on the basis of the borrower's collateral and savings. On the other hand, household and consumer loans are not granted on that basis, allowing consumers to more readily get over their heads in debt..

The government has pledged to work on reducing over-indebtedness and debt-related problems, and the issue is set to be discussed after the parliamentary holiday season ends in late August. A Treasury Task Force is also scheduled to submit a report on what measures should be taken to curb over-indebtedness.

The option of introducing a consumer debt ceiling is one of the measures on the government's table.

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Briitta Korhonen, Espoo: "The debt ceiling is of course part of that old-fashioned control society, but it would provide more security. Everything is based on consumption nowadays, and the only talk is of growth. It's a problem." Image: Markku Pitkänen / Yle

Positive Credit Register

The fine details of how a debt ceiling might work are yet to be resolved; such as ways to set up a low debt ceiling, and how to create the ability to legally access information about residents' debt levels.

Implementing a debt ceiling would also require setting up a positive credit register or similar system. A positive credit register is a database from which lender companies can see a borrower's loan amounts as well as income information - in real time. Currently, lenders only see data regarding a potential borrower's possible payment defaults, if there are any to be seen.

Despite those needed changes, a positive credit register is widely expected to be introduced to Finland during the government's term.

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Sofia Aalto (left) and Jonna Sorvisto, Helsinki: "Sounds good. We work in a bank and the debt of young people is worrying. We want everything and don't seem to realise that it needs to be paid off at some point." Image: Markku Pitkänen / Yle

"It is absolutely necessary to address it now"

Real action is on the way, says Anu Raijas, Research Manager at the Finnish Competition and Consumer Authority.

"We are constantly seeing different statistics showing that households are having problems with credit. It is absolutely necessary to address it now," Raijas told Yle.

Raijas is a long-term debt researcher and one of the experts on the Ministry's working group. She points out that limitations on borrowing are only meant to root out problems, not place restrictions on people's sovereignty.

"Ultimately, it is always up to each household to decide whether or not to borrow. But there is also a need for some regulation and responsible lending," Raijas added.

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Hannu Mäensivu, Tampere: "Debt ceiling sounds pretty good to me. You have to get someone to stop your debt. Goods are sold too easily now and on too good terms." Image: Markku Pitkänen / Yle

The fastest increase in household debt levels took place in Helsinki. Between 2012 and 2017, household debt in the capital increased by an average of 17 percent, compared to only four percent in the rest of the country.

Timo Cantell, Helsinki City Information Manager, said he is not worried about debt trends in the capital.

"Not at all. The cost of housing is largely responsible for the level of debt, and it is known that house prices here are going up - or at least staying level. Mortgages are also about increasing your wealth and not as risky as anywhere else in the country," Cantell explains.

Net assets are growing not only in Helsinki but elsewhere in Finland. Nevertheless, all loans are subject to economic fluctuations.

"Mortgages are bigger in euros, but the biggest risks are hidden on the consumer credit side. And if the finance ministry's rhetoric is followed, then people will be encouraged towards more private consumption," Raijas said.

The survey, commissioned by Yle and carried out by polling firm Tilastokeskus, queried 982 residents over the age of 15 by telephone at the beginning of June. The poll had a margin of error of around three percentage points in either direction.