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Mortgage lenders welcome easing of deposit rules for homebuyers

Homebuyers now need only a ten percent deposit. 

Kauppakirja ja avain pöydällä.
Housebuying just got a little bit easier. Image: Ismo Pekkarinen / AOP

Mortgage lenders have welcomed a decision by the Finnish Financial Supervisory Authority (FSA) to reduce the minimum deposit needed to purchase a new home.

The move reverses a previous decision to raise the minimum deposit to 15 percent, in order to help prevent over-indebtedness.

The FSA says that the coronavirus epidemic has forced it to reconsider.

‘In the current exceptional situation caused by the corona pandemic, it is important to support the flow of credit to the real economy. Bringing the maximum loan-to-collateral (LTC) ratio back to the base level will support the proper functioning of the housing market,’ said Marja Nykänen, Chair of the FSA Board, in a press release.

The FSA said in announcing the change that borrowers' ability to repay housing loans should still be carefully assessed, but there was currently no risk of the housing market overheating.

Easier to switch homes

Industry group Finance Finland said that the decision would make things easier for those looking to move to a bigger place.

"It's the right signal, in this situation it's good to remove restrictions on moving within Finland," said the group's Chief Economist Veli-Matti Mattila.

"It's important that labour is able to move as smoothly as possible from one place to another."

Mattila adds that the priority now should be to support the economy, rather than restricting debt.

"This is the balance that the authorities have to consider," said Mattila. "How much should they emphasise the risk of indebtedness, and how much they emphasise the movement of labour."

Harri Nummela of banking group OP said the change will support the housing market.

"This is especially significant for those customers who are able to service a loan, but don't have lots of savings or other collateral," said Nummela.

In Nummela's view most households are managing their debt well, and lenders keep close tabs on them anyway.

"In my opinion Finns' own financial management skills have improved a lot in the last ten years," said Nummela. "That applies to borrowing but also saving and investing."

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