Norwegian banks predict they will continue to tighten credit standards to businesses through September, a central bank survey showed.
The banks will keep credit standard for households unchanged in the third quarter after leaving them broadly unchanged in the second quarter and tightening them earlier this year, the survey also showed. Credit demand from households and corporations is expected to remain steady in the third quarter after increasing “slightly,” the survey showed.
Near record-low interest rates and falling unemployment have fueled household credit growth and boosted home prices in the world’s third-richest country per capita. Norway’s Financial Supervisory Authority, which has said the overheated property market is the biggest domestic threat to the economy, last year pushed through guidelines for banks, urging them not to loan more than 85 percent of a home’s value.
Stricter standards have so far failed to cool the property market and prices rose an annual 7.7 percent in June, according to the Real Estate Brokers Association.
“We still need to see the effect in the housing market from this tightening,” Katrine Boye, senior economist at Nordea Bank AB in Oslo, said by phone. “We still see quite strong price growth and credit growth is also high.”
The central bank last month kept its benchmark interest rate unchanged at 1.5 percent, after two cuts since December. The bank also signaled it may start raising rates as early as the end of the year, earlier than previously projected.
The survey showed that demand for ordinary residential mortgages, fixed-rate loans and home equity credit lines rose last quarter while demand for first-home mortgages fell.
“Capital adequacy and FSA guidelines for prudent residential mortgage lending were identified as factors affecting credit standards,” according to the survey.
Norges Bank’s bank lending survey was conducted from June 29 to July 10.
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