Macroprudential decision: Loan cap and risk weight floor for residential mortgage loans unchanged - High level of debt increases households’ vulnerability to weakening economic situation


The Board of the Financial Supervisory Authority (FIN-FSA) has decided to keep the loan cap and risk weight floor for residential mortgage loans unchanged, and has decided not to impose on banks a countercyclical capital buffer (CCyB). Households’ downpayments have grown but, according to the latest information, the repayment periods of new loans have lengthened. The Board of the FIN-FSA urges banks and households to avoid longer than usual loan repayment periods and to pay attention to the risks of households’ high level of indebtedness and the rapid growth in housing corporations’ loan stock.

“High levels of debt may reduce households’ consumption in adverse economic conditions and therefore intensify cyclical downturns.For this reason, there is still good reason to use macroprudential instruments to contain the growth of household indebtedness,” says Marja Nykänen, Chair of the FIN-FSA Board.

Household indebtedness relative to income remains close to record levels.Overall, the household loan stock is expected to continue to grow somewhat faster than growth in incomes and the economy.

In addition to growth in the loan stock, loan repayment periods have lengthened as the proportion of new residential mortgage loans accounted for by 25-year and longer loans has increased.The lengthening of residential mortgage loan repayment periods contributes to increasing the risks associated with indebtedness.

At its meeting on 27 September 2019, the Board of the FIN-FSA took a position on the level of the maximum LTC ratio and the CCyB.The Board of the FIN-FSA decided to maintain its earlier decision, which entered into effect on 1 July 2018, on lowering the maximum LTC ratio by 5 percentage points for residential mortgage loans other than first-home loans.Maintaining the earlier decision is justified in containing indebtedness.

In addition, the Board decided not to impose on credit institutions a CCyB.The primary risk indicator for imposing a CCyB has remained below its threshold value.Moreover, other supplementary risk indicators are not signalling such a build-up of financial system risks as would necessitate the imposition of a CCyB.

The decision of the Board of the FIN-FSA extends by one year the average minimum risk weight of 15% applicable to residential mortgage loans of credit institutions using the Internal Ratings Based Approach. The extended period of application begins on 1 January 2020.European Commission did not oppose the decision made by the Board in June 2019.


 - Board’s decision on the application of macroprudential instruments (pdf)

 - Proposal of the Director General of the FIN-FSA, circulated for comment, on the application of macroprudential instruments (pdf, in Finnish)

 - Opinions (in Finnish only) on the Director General’s proposal on the application of macroprudential instruments (pdf)

- Bank of Finland

- Ministry of Finance

- Ministry of Social Affairs and Health



For further information, please contact:

Marja Nykänen, Chair of the Board of the Financial Supervisory Authority, tel. +358 9 183 2007

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Finanssivalvonta, or the Financial Supervisory Authority (FIN-FSA), is the authority for supervision of Finland’s financial and insurance sectors. The entities supervised by the authority include banks, insurance and pension companies as well as other companies operating in the insurance sector, investment firms, fund management companies and the Helsinki Stock Exchange. We foster financial stability and confidence in the financial markets and enhance protection for customers, investors and the insured.

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