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Norway Banks Complain of High Household Debt

Norway Banks Complain of High Household DebtNorway Banks Complain of High Household Debt

Norwegian banks are solid, but the financial system is vulnerable to high household debt and elevated property prices, TNP reported. “High debt increases the risk of a tightening of household consumption in response to a substantial fall in house prices and a pronounced rise in the interest rate level. This is a source of financial vulnerability and could amplify an economic downturn. This could in turn lead to increased corporate loan losses for banks,” says Deputy Governor Jon Nicolaisen. In conjunction with high debt levels, elevated property prices represent a source of financial vulnerability. Commercial property prices have risen since the financial crisis in pace with falling long-term rates. House prices rose rapidly in 2016, but since spring prices have edged down. “Subdued house price inflation will curb household debt growth, but it will take time for vulnerabilities to recede. The correction in the housing market in 2017 may lower the risk of an abrupt and more pronounced decline further out,” says the deputy governor.

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