31.03.2011Housing loan repayment capacity among Finnish households remained good in the second half of 2010. However, the slight rise in home prices and interest rates has turned the index to a moderate rise: Nordea's index value at the end of the review period was 32.7 compared to 32.0 at the end of 2009. Housing loan servicing costs are exceptionally small thanks to the continued record-low interest rates.
During the review period, the average interest rate rose, however, from 1.9 per cent in the second quarter of 2010 to 2.2 per cent. The highest increases in the index were seen in Vaasa, Helsinki and Kokkola, whereas Kajaani, Kuopio, Oulu and Turku witnessed slight decreases.
Housing loan repayment capacity was the poorest in Helsinki (47.2) and the best in Kajaani (21.1). The average monthly loan payment in Helsinki grew to 833 euros, which means almost 35 euros more per month. In Kajaani the corresponding payment decreased 8 euros compared to the end of June and is now 308 euros.
Home prices in the whole country increased slightly. The average home price in Finland was 163,891 euros at the end of the year. In Helsinki it amounted to 274,867 euros, whereas the cheapest homes were available in Kajaani, where they cost 101,760 euros.
- Although both home prices and interest rates have slightly risen, especially 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. When planning to buy a home and calculating the loan servicing costs they should take into account that the interest rate level is likely to rise in the future, says Nordea's Economist Pasi Sorjonen.
Nordea is now using an interest rate of 6 per cent when making loan calculations for customers. The interest rates are still on the increase, so with the current interest rates you should absolutely not take out the maximum housing loan that you can now afford.
- If you have a fair amount of housing loan proportioned to your income, as customers who have just bought their first home or built a house typically have, using interest hedging is quite sensible in such a situation, says Private Economist Anu Numminen.
Housing affordability
|
Home
price, €
|
Loan
service
cost/
month
|
Index
2/10
|
Index
3/10
|
Index
4/10
|
Change
Q2-Q4
|
| All of Finland |
163 891 |
497 |
32,0
|
32,5 |
32,7 |
+0,7 |
| Helsinki |
274 867 |
833 |
45,9 |
46,5 |
47,5 |
+1,6 |
| Espoo |
239 002
|
724
|
38,3
|
39,1 |
39,4
|
+1,1 |
| Porvoo |
170 419
|
516
|
32,3 |
32,9
|
33,6 |
+1,3 |
| Vantaa |
193 382
|
586
|
35,4 |
35,9 |
36,5
|
+1,1 |
| Tampere |
166 886
|
506
|
32,5 |
33,0
|
33,1 |
+0,6 |
| Hämeenlinna |
139 315
|
422
|
28,2 |
29,1
|
29,4 |
+1,2 |
| Kuopio |
140 851
|
427
|
29,8 |
29,7
|
29,2 |
-0,7 |
| Turku |
138 317
|
419
|
29,0 |
29,0
|
28,8 |
-0,2 |
| Joensuu |
132 173
|
401
|
28,3 |
27,4
|
28,6 |
+0,3 |
| Mikkeli |
122 726
|
372
|
27,0 |
27,7
|
27,1 |
+0,1 |
| Lappeenranta |
127 181 |
385 |
25,5 |
26,3
|
26,8 |
+1,3 |
| Jyväskylä |
138 086
|
418
|
26,8 |
27,2
|
27,8 |
+1,0 |
| Vaasa |
135 839
|
412
|
24,6
|
26,1
|
27,0 |
+2,4 |
| Oulu |
123 418
|
374
|
25,3
|
25,4
|
24,8
|
-0,5
|
| Lahti |
124 339
|
377
|
25,8
|
26,8
|
26,5
|
+0,7
|
| Seinäjoki |
118 502
|
359
|
24,8
|
25,6
|
25,4
|
+0,6
|
| Kokkola |
124 416
|
377
|
24,3
|
24,5
|
26,2
|
+1,9
|
| Kotka |
108 365
|
328
|
21,4
|
22,2
|
22,1 |
+0,7 |
| Rovaniemi |
122 189
|
370
|
24,6
|
24,8
|
25,4
|
+0,8
|
| Pori |
108 365
|
328
|
21,7
|
21,8
|
22,7
|
+1,0
|
| Kajaani |
101 760
|
308
|
22,0
|
22,3
|
21,1
|
-0,9
|
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 on 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
Pasi Sorjonen, Economist, +358 9 165 59942
Kati Tommiska, Group Identity & Communications, +358 9 165 42320
