“The Norwegian financial system is resilient. Households and firms have adequate debt-servicing capacity, and banks are solid. At the same time, there is still a heightened risk of events that could weaken financial stability,” says Deputy Governor Pål Longva.  

The outlook for the global economy is highly uncertain. The balance of risks is marked by geopolitical tensions and changes in global trade policy. In a global, interconnected financial system, new shocks may quickly impact the Norwegian financial system. 

Lower household debt-to-income ratios 

Norwegian households have high debt-to-income (DTI) ratios, but debt growth has been slower than income growth in recent years.  

“DTI ratios have declined broadly across different household groups, with the sharpest decline among the groups with the highest debt. This has made households somewhat less vulnerable to interest rate hikes, loss of income or a fall in house prices. On the other hand, household vulnerabilities may increase again if looser financial conditions result in rapidly rising house prices and debt,” says Pål Longva.  

Over the past two years, wage growth has outpaced inflation, and residential mortgage rates have edged down slightly in 2025. This has strengthened household purchasing power and improved debt-servicing capacity. 

Stable developments in commercial real estate, but still a challenge for real estate developers 

Norwegian banks’ commercial real estate (CRE) exposures are substantial. In recent years, the situation has become more difficult for CRE firms owing to higher financing costs and lower property values, but high employment and increased rental income have enabled most firms to cover expenses with current earnings. Solvency in the CRE sector as a whole improved somewhat in 2024. 

Construction activity is still low in real estate development. Earnings have fallen, and bankruptcy rates have risen. Somewhat lower financing costs and higher house prices may boost profitability ahead, but Norges Bank still expects somewhat higher bank losses on loans to real estate developers. 

The countercyclical capital buffer (CCyB) helps bolster resilience. 

Norwegian banks are solid, which is important for financial stability. Banks’ losses are low, and banks satisfy capital and liquidity requirements. Households and firms have ample access to credit Norges Bank sets the CCyB rate each quarter. At its meeting on 5 November, the Committee decided to keep the buffer rate unchanged at 2.5 percent.  

“It is important to maintain financial system resilience so that vulnerabilities do not amplify an economic downturn. The countercyclical capital buffer requirement makes a contribution in this regard,” concludes the Deputy Governor.