Buy-to-let mortgages are becoming more common than ever before and, according to the most recent data, their share of new housing loans stands at 10%. The lion’s share of non-subsidised rental housing is privately owned.

COVID-19 has not shaken the operating capacity of the Finnish financial system. However, there is cause for concern in the prolonged growth of household indebtedness, which could threaten Finland’s ability to cope with future economic crises.

A larger share than before of new housing loans have been granted to highly indebted households. Large amounts of debt are particularly common among households in the growth centres. A debt-to-income cap would rein in excessive indebtedness.

Housing company loans are increasing household indebtedness and altering the structure of debt. A loan-to-value limit of 60% would reduce housing-purchasers’ substantial accumulation of debt via housing company loans.

As a result of digitalisation, the number of different companies providing consumer credit and corporate finance services in Finland has increased. This has aroused concerns about increasing indebtedness among households and companies.

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.

The more debt households take on during an economic upswing, the more likely they are to cut consumption when the economy begins to run out of steam.

The indebtedness of Finnish households relative to income has grown considerably since the turn of the millennium. A proportion of new residential mortgage holders have a heavy debt burden relative to their income.