Housing finance in Norway Governor Svein Gjedrem Norwegian Covered Bond Forum 27 January 21 1
Lending by lender sector. Norway As a percentage of total lending. 1976 29 1) 1 1 Others 8 6 State lending institutions Mortgage companies 8 6 4 4 2 Banks 2 1976 1979 1982 1985 1988 1991 1994 1997 2 23 26 29 1) Statistical break in 1985. Figures for 1976-1984 for state lending institutions include Norges Bank Sources: NOU (Official Norwegian Report) 1989:1, Statistics Norway and Norges Bank 2 2
Housing finance in selected countries in the 199s By lender sector. Per cent 1) 1 9 8 7 6 5 4 3 2 1 Denmark Sweden Norway 1 9 8 7 6 5 4 3 2 1 Mortgage companies Banks State institutions Insurance companies/pension funds Others 1) 1992 for Denmark and Norway and 1989/199 for Sweden. Residential mortgage loans from state lending institutions are not specified for Denmark and Sweden Source: NOU (Official Norwegian Report) 1995: 11 3
Housing finance in selected countries. 29 By lender sector. Percent 1) 1 1 9 9 8 8 7 7 6 6 Banks 5 5 4 4 3 3 2 2 1 1 Denmark Sweden Norway Mortgage companies State institutions Others 1) Residential mortgage loans from state lending institutions are not specified for Sweden Source: Danmarks Nationalbank, Sveriges Riksbank, Statistics Norway and Norges Bank 4
Fixed-rate loans as a percentage of total household lending 1) 24 Q1 29 Q2 7 6 5 4 3 2 1 Norway Sweden Denmark 7 6 5 4 3 2 1 24 25 26 27 28 29 1) Figures for Denmark refer to residential mortgages only Sources: Danmarks Nationalbank, Sveriges Riksbank, Statistics Norway and Norges Bank 5 5
Five-year government bond yield and three- month money market rate January 1979 January 21 2 Five-year government bond yield Three-month money market rate 2 15 15 1 1 5 5 1979 1982 1985 1988 1991 1994 1997 2 23 26 29 Source: Thomson Reuters 6
Banks assets and funding 29 Q2. Per cent 1 9 8 7 6 5 Other assets Deposits / lending to financial corporations Securities measured at fair value Lending to 4 Norwegian households 3 2 1 Assets Lending to Norwegian nonfinancial corporations Liabilities Customer deposits Deposits/ borrowing from financial corporations Other debt Securities debt Equity capital Sources: Statistics Norway and Norges Bank 7 7
Sources of bank funding in Norway 1) As a percentage of total assets. 1975 28 and 29 Q3 1 Equity capital 1 8 8 6 Deposits Swap arrangement 6 4 Loans from Norges Bank 4 2 2 Market funding and other debt 1975 198 1985 199 1995 2 25 29 Sources: Klovland (27), Matre (1992), Statistics Norway and Norges Bank 8 8
Banks market funding by residual maturity Per cent. 25 Q1 29 Q3 7 7 6 6 5 5 4 4 3 3 2 2 1 Less than 1 month Less than 1 year 1 Mar-5 Mar-6 Mar-7 Mar-8 Mar-9 Source: Norges Bank 9 9
Banks foreign currency funding As a percentage of total t assets. 1998 Q1 29 Q3 4 4 3 3 2 2 1 1 1998 2 22 24 26 28 Source: Norges Bank 1
An efficient bond market is characterised by: instruments that are easy to understand clear regulation transparency in trading multiple independent bidders and askers high trading volumes in primary and secondary markets 11 11
Proposed changes in the collateral requirements for loans from Norges Bank No new securities under the temporary rules are approved as collateral as from 22 October 29 Securities already approved under the temporary rules may be pledged as collateral until maturity, at the latest until 15 February 212 Debt instruments issued by foreign banks will be included in the bank quota as from 1 December 21 Securities issued by banks will no longer be eligible as collateral l for loans from 15 February 212 Norges Bank will continue to accept covered bonds (OMF) as collateral l for loans 12 12
House prices in selected countries Index. 1995 Q1 =1. 1995 Q1-29 Q4 4 US 35 UK 3 25 2 15 1 5 Norway 1995 1997 1999 21 23 25 27 29 4 35 3 25 2 15 1 5 Sources: Thomson Reuters, Standard & Poor s, Case-Shiller, Association of Norwegian Real Estate Agents, ECON Pöyry, Finn.no, Association of Real Estate Agency Firms and Norges Bank 13 13
Periods of rise in real house prices in Norway Number of years and total rise in per cent. 1819-28 1993-27 15 years 1977-1987 11 years 1955-1972 18 years 1922-1933 12 years 189-1898 9 years 1865-1878 14 years 5 1 15 2 25 Sources: Statistics Norway and Norges Bank 14 14
Residential mortgages by loan-to-value ratio. Norway As a percentage of total t residential mortgages 1). 1997-29 5 4 below 6% 6-8% 8-1% above 1% 5 4 3 3 2 2 1 1 1997 1999 21 23 25 27 29 1) Total residential mortgage loans in the survey. The figures for 29 are based on the spring 29 residential mortgage loan survey, which contains fewer observations than previous surveys. Source: Finanstilsynet s (Financial Supervisory Authority of Norway) residential mortgage loan survey 15 15
Periods of decline in real house prices in Norway Number of years and total decline in per cent. 1819-28 5 years 1988-1992 4 years 1973-1976 11 years 1934-1944 7 years 1915-1921 7 years 1899-195 2 years 1879-188 -6-5 -4-3 -2-1 Sources: Statistics Norway and Norges Bank 16 16
Housing finance in Norway Governor Svein Gjedrem Norwegian Covered Bond Forum 27 January 21 17