Norway Heading Toward Credit Shock

Norway’s Director General of the country’s Financial Supervisory Authority has said in an interview:

Growth rates on household debt and house prices are not following a sustainable path. The longer these developments go on, the greater the risk is of a severe imbalance evolving.

According to a report at Bloomberg News, the country’s central bank estimates that household debt will equal more than 200% of total disposable income by the end of the year. To try to put a stop to the soaring home valuations and credit risk, the country imposed a maximum loan-to-value limit on home loans of 85% in December. The government has no plans to adopt additional measures to curb debt growth, likely because this is an election year in Norway.

Though severe, Norway, which does not belong to the Eurozone, has tools available to it that were not available to Eurozone countries like Ireland and Greece.