Housing and real estate trading has continued despite the economic uncertainty. The rapid rise in prices and lending growth are increasing the vulnerabilities of Nordic banks.

The banks have coped well during the pandemic and have been able to provide credit to businesses and households. Very long loan durations are a cause for concern. New tools are needed to rein in the build-up of debt.

The financial system is stronger today than during earlier crises, but banks will inevitably see a rise in their loan losses. Government and the financial sector must continue their exceptional measures to support businesses and households.

The coronavirus pandemic has the potential to aggravate long-standing vulnerabilities in the Nordic housing market. Housing market disturbances can increase credit risk for banks and interfere with their access to funding.

Abundant construction in the Helsinki metropolitan area has put a brake on apartment prices.

The current loan-to-value cap on housing loans urgently needs to be accompanied by a new, more comprehensive cap on debt. This would take into account all a loan applicant’s debt relative to their income.

An extensive materialisation of risks on the Swedish housing market could also have notable effects in the other Nordic countries.

Low risk premia and high valuations have increased global securities markets’ exposure to price corrections and abrupt shifts in risk premia.