01.09.2010Housing loan repayment capacity among Finnish households remained good in the first half of 2010. However, the rise in housing prices has turned the index to a moderate rise: Nordea’s index value was at the end of the review period 31.8 compared to 31.1 at the end of last year. Housing loan servicing costs are exceptionally small thanks to the continued record-low interest rates.
During the review period, the average interest rate decreased to 1.9 per cent from 2.0 per cent in the fourth quarter of 2009. The highest increases in the index were seen in Porvoo, Rovaniemi and Kajaani, whereas Lahti, Mikkeli and Kotka experienced slight decreases.
- Housing loan repayment capacity was the poorest in Helsinki (45.6) and the best in Kotka and Pori (21.4). The average monthly loan payment in Helsinki grew more than 30 euros to 796 euros. In Pori the corresponding payment increased only 8 euros compared to the turn of the year and is now 307 euros, says Nordea’s Economist Reijo Heiskanen.
Housing prices in the whole country increased slightly. The average home price in Finland is now 163,277 euros. In Helsinki the average price is 271,872 euros. The cheapest homes are available in Pori, where the average price is 104,755 euros.
Although housing prices have risen, the record-low interest rate level keeps the monthly servicing costs quite small for the time being. Homebuyers should not, however, let the low costs guide their decision-making too much. If you are planning to buy a home, you should, when calculating the loan servicing costs, take into account that the interest rate level is likely to rise in the future. Nordea is now using an interest rate of 6 per cent when making loan calculations.
- With the current interest rates, you should absolutely not take out the maximum housing loan that you can now afford. It is also wise to hedge the loan against rising interest rates now that the interest rate level is still low, says Nordea’s Private Economist Anu Numminen.
Housing affordability
|
Home
price, €
|
Loan
service
cost/
month
|
Index
4/09
|
Index
1/10
|
Index
2/10
|
Change
4/09-
2/10
|
| All of Finland |
163 277 |
478 |
31,1
|
31,5 |
31,8 |
+0,7 |
| Helsinki |
271 872 |
796 |
44,5 |
45,2 |
45,6 |
+1,1 |
| Espoo |
236 160 |
691 |
37,3 |
38,1 |
38,1 |
+0,8 |
| Porvoo |
166 195 |
486 |
29,2 |
30,1 |
32,0 |
+2,8 |
| Vantaa |
191 462 |
560 |
34,3 |
34,9 |
35,3 |
+1,0 |
| Tampere |
167 040 |
489 |
31,4 |
32,0 |
32,4 |
+1,0 |
| Hämeenlinna |
137 088 |
401 |
28,0 |
27,5 |
28,3 |
+0,3 |
| Kuopio |
144 000 |
421 |
27,3 |
29,0 |
29,2 |
+0,9 |
| Turku |
142 771 |
418 |
27,5 |
28,1 |
29,0 |
+1,5 |
| Joensuu |
132 710 |
388 |
27,8 |
27,4 |
28,1 |
+0,3 |
| Mikkeli |
123 494 |
361 |
26,8 |
27,7 |
26,6 |
-0,2 |
| Lappeenranta |
128 794 |
377 |
25,7 |
25,9 |
26,5 |
+0,8 |
| Jyväskylä |
136 550 |
400 |
26,8 |
26,7 |
26,9 |
+0,1 |
| Vaasa |
127 027 |
372 |
24,3 |
25,5 |
24,7 |
+0,4 |
| Oulu |
127 565 |
373 |
24,2 |
24,4 |
25,0 |
+0,8 |
| Lahti |
122 266 |
358 |
26,0 |
25,5 |
25,4 |
-0,6 |
| Seinäjoki |
115 661 |
338 |
24,2 |
25,1 |
24,2 |
0,0 |
| Kokkola |
117 581 |
244 |
23,2 |
24,1 |
24,2 |
+1,0 |
| Kotka |
107 136 |
314 |
21,5 |
20,5 |
21,4 |
-0,1 |
| Rovaniemi |
122 573 |
359 |
22,9 |
25,1 |
24,9 |
+2,0 |
| Pori |
104 755 |
307 |
21,1 |
20,7 |
21,4 |
+0,3 |
| Kajaani |
110 285 |
323 |
20,7 |
20,9 |
22,4 |
+1,7 |
In Nordea’s index housing loan servicing costs are calculated for a surface area of 76.8 square metres, which, according to Statistics Finland, is the average size of a home in Finland. The loan taken out to purchase a home is 70 per cent of the purchase price and the loan period is 25 years.
The basis for the index is that loan costs, excluding tax deductions, should not exceed 25 per cent of a household’s gross income. If the index is 100, the household spends 25 per cent of its gross income for loan servicing. The smaller the figure, the better the household’s ability to service the housing loan needed for the exemplary home of the index at present.
For further information:
Anu Numminen, Private Economist, +358 9 165 88218
Reijo Heiskanen, Economist, +358 9 165 59942
Kati Tommiska, Chief Press Officer, +358 9 165 42320
