Household debt has long risen faster than income. In recent months, household debt growth has edged down. After declining in 2017, house prices have risen again in 2018.

The upswing in the Norwegian economy and continued low interest rates entail a risk of high house price inflation ahead. This may lead to a renewed rise in household sector debt growth and vulnerabilities. On the other hand, an increase in the interest rate level will help curb debt growth. The pronounced rise in commercial real estate prices in recent years has increased the risk of marked value declines further out.

"A continued rise in residential and commercial property prices that leads to an increase in financial imbalances may indicate a need to raise the countercyclical capital buffer rate", says Governor Øystein Olsen.

In line with Norges Bank's advice, the Ministry of Finance decided today to keep the buffer rate unchanged at 2 percent.

• Ministry of Finance press release
• Norges Bank's advice is issued in the letter: Advice on the countercyclical capital buffer 2018 Q2
• The decision basis for Norges Bank's advice is presented in Section 5 of the June 2018 Monetary Policy Report and Indicators of financial imbalances