Comprehensive overview is important when changing the conditions on the housing market

The LTV cap is a borrower-based measure limiting a mortgage to 85 percent of a property's value. The borrower needs to finance the remaining 15 percent – called the down payment – in some other way, for instance with savings. Some borrowers take out an unsecured loan to finance their down payment. On one hand, an increase in the LTV cap could lead to lower costs for borrowers who would otherwise have taken out an unsecured loan. This is because mortgages have lower interest rates than unsecured loans. On the other hand, an increase in the LTV cap will most likely lead to households borrowing more. Therefore, households would become more vulnerable to, for example, a loss of income or a drop in house prices.

The ongoing inquiry into, among other things, the mortgage cap and the amortisation requirement will be completed in the autumn of 2024. The inquiry is expected to put forth proposals on how these measures can comprehensively be designed to manage risks, to both the economy and to consumers, stemming from household indebtedness.

FI makes the assessment that an increase in the LTV cap would lead to higher household indebtedness and an increase in associated risks. We also take the position that it is appropriate to wait for the ongoing inquiry and consider any changes to the measures comprehensively.

"Given that FI must consider its role of protecting financial stability and consumers, we take the position that the positive consequences of a general increase in the LTV cap will be outweighed by the associated negative consequences. This assessment still holds if interest rate deductions for unsecured loans are phased out. However, we also understand that the Government may come to a different conclusion as it also considers other social goals," says FI's Director General Daniel Barr.