Rising interest rates, accelerating inflation, and the consequent rise in housing costs are particularly straining the wallets of homeowner-occupants, Nordea Bank says in its latest housing market review.
According to the consumer price index, housing costs rose by 7.3 percent year-on-year in February.
"The price of electricity has risen by an average of 30 percent. The development of heat and water prices has been more moderate so far, but they have also risen faster than in previous years," says Nordea economist Juho Kostiainen in a Wednesday press release.
In addition to heating and electricity, maintenance and renovation prices have also gone up, putting significant upward pressure on maintenance charges for owners in housing corporations.
Kostiainen points out that higher maintenance charges primarily affect flat owner-occupants but is also biting into the income of investors, since it may not be possible to be shift higher costs to rents due to weakened demand for rental accommodations.
Rising interest rates will also soon start pushing up costs for mortgage holders. The general reference rate for mortgages, the 12-month Euribor, is expected to rise above zero this year.
"Although the net indebtedness of Finnish households has not increased in recent years, changes in the reference rate will affect the funds available to households," warns Jussi Pajala, President and CEO of Nordea Mortgage Bank.
More interest rate risk than the rest of the eurozone
Finnish mortgages are almost entirely contracted at a floating interest rate. This means most face a higher risk than elsewhere in the eurozone, where more than 80 percent of mortgages are fixed-rate.
According to Nordea's review, housing sales have recovered rapidly after a brief slump at the start of the war in Ukraine. The number of loan applications has already returned to the normal spring level.
However, the rise in housing prices is expected to remain modest, and the heating in the market sparked by the coronavirus pandemic seems to have passed.
