Norway’s central bank urges government to lower home equity requirement as Conservative Party supports change

Earlier this week, Norway’s central bank urged the government to consider lowering the equity requirement for home purchases from 15% to 10%. The Conservative Party (Høyre) now supports this move, despite having introduced the 15% requirement in 2015 under then-Prime Minister Erna Solberg.

Tina Bru, Deputy Leader of Høyre, emphasized that the current system forces individuals to rely heavily on parental support to meet equity demands, creating a social divide that she believes is detrimental. She expressed concerns about an emerging generational gap between those who can enter the housing market and those who cannot.

Under existing regulations, homebuyers must typically provide 15% equity, allowing them to borrow up to 85% of the purchase price. Bru and Solberg argue that many young people possess the capability to repay loans but are hindered from obtaining them due to insufficient equity.

Solberg remarked that when the 15% requirement was implemented, interest rates were significantly lower, which necessitated protective measures against excessive borrowing. However, with current high interest rates, she noted, the loan appetite has already decreased.

The government is reportedly open to revising the lending regulations, with the Labour Party’s finance committee leader, Tuva Moflag, acknowledging the need to reevaluate both the equity requirement and interest-free periods.

Consumer advocacy groups, however, express skepticism, warning that lowering the equity requirement might exacerbate problems rather than solve them. They argue it would primarily benefit individuals with already good financial standing, driving up housing prices further and making it even more challenging for first-time buyers to enter the market.