Macroprudential decision: Housing loan cap and countercyclical capital buffer requirement for banks remain unchanged

Press release 28 March 2024

Macroprudential decision: Housing loan cap and countercyclical capital buffer requirement for banks remain unchanged

The Board of the Financial Supervisory Authority (FIN-FSA) is to keep the housing loan cap, i.e. the maximum loan-to-collateral (LTC) ratio, at its statutory standard level. Additionally, the Board decided to maintain the countercyclical capital buffer (CCyB) requirement for banks at 0.0%.

The growth prospects for the global and euro area economies remain subdued. The euro area economy will grow by 0.6% in 2024 according to macroeconomic projections made by European Central Bank (ECB) staff. In Finland, economic activity fell extensively in the latter half of 2023. The situation in the labour market has also deteriorated. According to the Bank of Finland’s March interim forecast, Finland’s GDP will contract by 0.5% in 2024 and economic growth will only start to recover in the latter half of the year.

Housing loan cap remains at its statutory standard level

In January–February 2024, housing sales slowed again after having picked up at the end of 2023 from the previous months. First-home transactions increased in November–December following the Government’s announcement of the removal of the transfer tax exemption for first-home purchases as from the beginning of 2024. The persistent upward trend in household indebtedness was reversed in 2022–2023 as inflation increased, interest rates started to rise, households’ demand for credit fell and nominal income growth accelerated.

In December 2023, the Board of the FIN-FSA decided to return the maximum LTC ratio for new housing loans other than first-home loans to its statutory standard level of 90%. In the Board’s view, there have since been no changes in the housing market and mortgage lending that would threaten financial stability and require the level of the maximum LTC ratio to be readjusted.

“There are currently no signs of overheating in the housing market or of excessive mortgage borrowing. However, the high level of household indebtedness entails structural risks and vulnerabilities, and these should be closely monitored,” says Chair of the FIN-FSA Board Marja Nykänen.

Countercyclical capital buffer requirement for banks remains unchanged

Indicators of private sector indebtedness and credit stock growth suggest that the financial cycle is still in a contractionary phase, and there are no signs of a sharp turn in the credit cycle. According to an overall assessment based on risk indicators, there are no grounds for the imposition of a CCyB requirement, and so this will be kept at the standard level of 0.0%.

As regards the entry into force (1 April 2024) of the FIN-FSA Board’s decision of March 2023 concerning the systemic risk buffer (SyRB) requirement, the Board concludes that, based on the risk indicators guiding the imposition of this requirement, the systemic risks in the Finnish financial sector have remained largely unchanged from 2023. It is not expected that the entry into force of the SyRB requirement will have a negative impact on the functioning of the credit market.

The Board of the Financial Supervisory Authority assesses on a quarterly basis the short and long-term risks to the stability of Finland’s financial system. If necessary, the Board may tighten or relax its macroprudential instruments for promoting stability. The Board decides on a quarterly basis the level of the countercyclical capital buffer (CCyB) requirement and the level of the maximum loan-to-collateral (LTC) ratio for housing loans. The levels of additional capital requirements for nationally systemically important institutions (O-SII buffers) are reviewed at least annually and the level of the systemic risk buffer (SyRB) at least every second year.

For further information, please contact:

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

View this link to access the appendices listed below

• The FIN-FSA 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 concerning the Director General’s proposal on the application of macroprudential instruments (PDF, in Finnish)
  • Bank of Finland
  • Ministry of Finance
  • Ministry of Social Affairs and Health