Comment by dogma1138 | Hacker News Reader

Comment by dogma1138 | Hacker News Reader

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Not bad, but not enough to cover the current levels of household debt in Norway, while a large portion of the debt is tied to mortgages the mortgage debt in the Norway have been increasing faster than income for quite a few years now. http://www.tradingeconomics.com/norway/households-debt-to-gd...

This isn't a problem unique to Norway, Norway is just one of the biggest offenders, even in the Nordic countries there is a trend of creating a new generation or class of indentured citizens.

Many EU countries need to look at germany and start reducing housing prices, one of the main contributors to Germany's low household debt is a 10 year cap on mortgages.

Countries like Sweden and Norway just now starting to cap it, Sweden capped the mortgage term to 105 years (no this isn't a typo) this year and the current average mortgage term in Sweden is still over 140 years, and Norway isn't much better off (It was slightly higher than Sweden IIRC I just can't find a source atm).

While the Nordic countries take pride in their model the current economics are pretty bad under the surface, you have a combination of inflated housing prices, extreme housing shortages, and mortgages that can span over 3 generations.

To some extent the Nordic model isn't a choice it's an outcome of the economic policy to the point where a lot of people that appear to be wealthy are actually in dire debt and dependant on the state.

http://www.telegraph.co.uk/personal-banking/mortgages/sweden...

> one of the main contributors to Germany's low household debt is a 10 year cap on mortgages.

Where did you get the idea of that cap?

10-year mortgages were the common case, but there's no actual cap. (See here for current mortgage interest rates up to 30 years: https://www.baufi24.de/tagesaktuelle-hypothekenzinsen/)

When you say "140 year mortgage term", what exactly are you talking about? Effective term or something? Because the banks only offer a choice between 20, 25 and 30 year mortgage terms usually.

Overall the time you are allocated to clear the debt, the 30 years is the "nominal" max term offered, it can be extended.

(a) in the 1990's, many banks did offer 50 year terms.

(b) sweden has a lot of interest-only mortgages. If you look at the rate they are being repaid, it represents a repayment period of 148 years.[1]

[1] http://www.fi.se/upload/43_Utredningar/20_Rapporter/2013/bol...

Norway's been tightening the mortgage belt for years now. You can only borrow less than 85% of the purchase price of the house, excluding fees. That was set in 2012 IIRC. And now (from January 2017) there will be a complete ban on interest-only mortgages (even just for limited time periods), and a hard cap at total loan amount (including also student/car loan etc.) for each family not exceeding 5x total gross income.

Source: am planning to buy a new house, had a meeting with my bank man two weeks ago.

I'm not certain about some of those mortgages: From everything I've learned since I've been in Norway, after the whole financial crisis they took steps to minimize some of the housing stuff.

Housing is expensive where I'm at: It is much cheaper outside of the city. There is debt tied to the house, if you own a house.

The average mortgage is 20-30 years - what you are stating isn't the average. This isn't actually all that much outside of the rates in the US, and part of the reason is to keep housing affordable for people. What is different is that people tend to stay at a job for a much longer time frame.

In addition, housing comes with a required down payment, depending on your age. I think for folks under 23, they have to have 10% down payment: Everyone else should have 20% (or possibly 25%), capped at something like 3.5 times income.

As far as debt goes, you can't really inherit debt here. You can inherit a bit of debt through inheritance - ie, tax on a house that had value. The other way to have that is for parents to co-sign on a loan, but that isn't the same sort of thing. There are some laws to prevent children inheriting debt from what I understand.

It's what inevitably happens when the balance between "owner-occupied housing as investment" and "housing as cost of living" gets out of whack.

"Sweden capped the mortgage term to 105 years"

Do you have any other citations for this? I have never heard about this in the Swedish news and I'm quite curious where The Telegraph got that information from.

Swedish financial authority:

http://www.fi.se/upload/43_Utredningar/20_Rapporter/2013/bol...

There are also reports from various global banks and financial organizations, google is your friend.

Will that be the reason why Germany has one of the lowest home ownership rates?

Not the only reason, and most likely not the primary one. When adjusted for age Germany has a pretty solid house ownership rate.

Germany is big and has a pretty mobile workforce, in many other countries you are considerably less likely to be moving every 2-5 years across large distances like you are in Germany.

Overall the affordability of housing even when accounting for mortgages and required seed money is considerably better in Germany than in Norway, Sweden or Denmark, and while Germany does have about half the house ownership rate on paper it is also because rent is both available and affordable and is favored by the younger workforce.

One can argue about what is better having to rent until you settle down at the age of 30-35, or buying a house at the age of 19 with decades of mortgage and only having to sell it to move into your parent's house which is still under mortgage. The house pricing in Oslo rivals NYC these days.

Also while Germany does have a considerable below average age for the EU28, the highest / above average EU28 countries are not those which you would expect, those are the Eastern European countries like Romania, Poland, Hungary, Slovakia etc. countries which were in the USSR/Warsaw Pact or were under socialism at one point or another. When you give everyone in the country a home at some point in time you'll end up having very high homeownership rates even 50 years later.

Thank you for explaining in detail. It's very interesting.

On the other hand, Nordics are not exactly clones of each other. I believe the mortgage terms are less crazy in Denmark and Finland.

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