Housing loans drawdown slides by one-third in Oct

Drawdowns of new housing loans in October totalled EUR 1.3 billion, a decline of one-third year-on-year, said the Bank of Finland on Wednesday.

The last time the level of housing loan drawdowns was equally low in October was in 2004. Of the new drawdowns, owner-occupied housing loans accounted for 92.8% and investment property loans for 7.2%.

The average interest rate on new housing loans rose notably in October 2022, to 3.09%. The average interest rate on investment property loans (3.34%) was higher than that on owner-occupied housing loans (3.07%).

The annualised agreed rate (AAR) on the stock of housing loans (EUR 107.7 billion) reflects households’ interest payments on all housing loans.

In October 2022, the AAR rose to 1.55%. The last time the AAR on the housing loan stock stock exceeded this level was in February 2013.

The interest rate on the housing loan stock follows the interest rate on new drawdowns with a lag, as the rate on the housing loan stock is adjusted when the rate on housing loans is reset. Interest rate hedges bought by households also contribute to slowing the rise in the rate on the housing loan stock.

Despite the pandemic, the energy crisis and rising interest rates, the problems for banks from housing loans have remained moderate.

At the end of October, the stock of non-performing housing loans accounted for 1.4% of the aggregate housing loan stock.

Relative to the housing loan stock, the share of non-performing investment property loans was smaller (0.9%) than that of owner-occupied housing loans (1.4%).