MNI BRIEF: Household Debt Vulnerability Reduced - Norges Bank

Norges Bank's new Financial Stability Report stated that the banking system was resilient, household debt growth has eased and they were less vulnerable to the risks of high debt levels but that the commercial real estate sector remained fragile.

Norges Bank noted that Norwegian households, which tend to acquire property early in life, are highly indebted by international standards but that debt-to-income levels have been declining and have fallen most rapidly for most highly indebted households, and the saving ratio has moved up to near 10% including dividends. 

Commerical real estate, however, is still a source of concern for the central bank with commercial banks having substantial CRE exposures and real estate developers struggling to cover expenses with current earnings. "Somewhat lower interest rates and higher house prices may boost profitability ahead, but Norges Bank still expects somewhat higher bank losses on loans to real estate developers," it stated.