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Housing loan interest rate hike likely next year, Bank of Finland chief says

The bank chief advised mortgage-holders to carry out economic stress tests to see if their budgets could tolerate an eventual interest rate increase.

Olli Rehn
File photo of Bank of Finland president Olli Rehn. Image: Henrietta Hassinen / Yle

Interest rates on housing loans will likely go up in the autumn of 2019, according to Olli Rehn, president of the Bank of Finland.

Rehn said that Finland's housing market is in relatively good shape compared to, for example, Sweden's. However, the national bank's chief said there are concerns about Finland's regionally-differentiated housing markets and the expansion of housing loan amounts.

Rehn said the European Central Bank (ECB) has indicated that European interest rates will remain unchanged at least until next summer, saying that there is an expectation in the market that interest rates will gradually begin to rise next autumn.

Speculation that Euroepan interest rates are set to rise was reported by Bloomberg in July. In a survey of economists, the financial publication reported that the consensus is that ECB president Mario Draghi will "squeeze in one interest-rate increase before his term ends next year."

Finnish residents in more debt than ever

Rehn voiced concern that many in Finland could be over their heads in debt. The national bank and the Financial Supervisory Authority have reported that Finnish households are in more debt than ever before - in relation to their annual incomes.

Rehn said he hopes that households across Finland check their budgets to deal with the eventuality of an interest hike.

The bank president also said he expects that European consumers will continue to use cash for quite some time, despite the recent increased use of bank cards and electronic payments.

Rehn said that around 75 percent of transactions and payments are still made in cash.

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