The rise in house prices has picked up in recent months and residential mortgage demand is high. Owing to persistently high house price inflation and rising household credit growth, financial imbalances may build up further. Both households and businesses appear to have ample access to credit.

Banks’ credit losses declined in 2020 Q2, but were appreciably higher than the average for the past 20 years. There is still uncertainty related to credit losses ahead. Norwegian banks are well equipped to absorb higher losses while maintaining credit supply.

“The Committee does not expect to advise the Ministry to increase the buffer rate again until 2021 Q1 at the earliest”, says Governor Øystein Olsen.

The Ministry of Finance decided today to follow Norges Bank’s advice.

• Ministry of Finance press release
• Norges Bank’s advice is issued in the letter: Advice on the countercyclical capital buffer 2020 Q3
• The decision basis for Norges Bank’s advice is presented in Section 5 of the September 2020 Monetary Policy Report
• Norges Bank’s framework and indicators for advice on the countercyclical capital buffer