The amendments to the law limiting the use of housing association loans and the maximum length of mortgage loans for individuals have passed the parliamentary hearing and will come into effect at the beginning of July. Housing lending is also affected by Fiva's recommendation on the upper limit of the loan servicing burden, which came into effect at the beginning of this year. Meanwhile, VTV's report on Ara's activities as a promoter of owner-occupied housing and wooden apartment building construction has just been completed. In addition, work is underway to evaluate changes to the land code that regulates the private law legal relations of real estate.
In the second reading, the Parliament approved a package of laws to limit the indebtedness of households. The background is already in 2019 published by the Mörttinen working group of VM on household indebtedness. The law's entry into force still requires the president's assent. The laws enter into force on July 1.7.2023, XNUMX.
The amendments to the law limit the use of housing association loans and regulate the maximum length of home loans for private individuals
In connection with new construction, the amount of housing associations' credit (housing association loans) is limited to a maximum of 60 percent of the debt-free price of the shares of new apartments for sale. The maximum loan repayment period is 30 years. Restrictions on housing association loans apply only to new buildings, i.e. renovation construction is outside the scope of the regulation.
In principle, the credit agreement should not include repayment holidays during the first five years after the construction phase has ended. In the credit agreement, however, it is possible to agree on a repayment-free or regular repayment of the debt capital in smaller installments for a maximum of 12 calendar months from the end of the construction phase.
In the presentation, the end of the construction phase refers to the time referred to in Chapter 1, Section 5 of the Housing Trade Act (construction control commissioning approval + administration handover meeting). In addition, temporary payment arrangements are allowed, which are necessary to secure the housing company's solvency.
The maximum repayment period for housing loans for individuals is limited to 30 years. However, the creditor may deviate from the maximum payment period in each quarterly period in 10 percent of the total amount of mortgage lending. The proposal does not include the so-called maximum debt ratio that was originally proposed. The maximum debt ratio would have limited the total amount of all debt service expenses of the household in relation to the household's income.
In addition, supervision of consumer credit will be transferred from the Regional Administrative Agency of Southern Finland to the Financial Supervisory Authority.
The background of the proposal is the recording of Prime Minister Marin's government program, which requires actions to curb both direct and indirect indebtedness of households. The purpose of the approved laws is to prevent the extension of payment periods for household mortgages, to curb excessive lending, especially to building societies, to promote customer protection and to improve the lending practices of other consumer lending.
RT presented a two-year repayment holiday to be kept in connection with the preparation and also did not consider it necessary to adjust the maximum loan period of 30 years for housing association loans or housing loans. In addition, RT has emphasized the important importance of housing association loans as a form of financing for all construction companies in new building projects.
Fiva's recommendation on the upper limit of the debt service burden entered into force at the beginning of the year
The recommendation given by the board of the Financial Supervisory Authority (Fiva) in June 2022 to banks regarding the upper limit of the loan management burden for mortgage applicants has entered into force on January 1.1.2023, XNUMX.
As a rule, housing loans can be granted to loan applicants whose total loan servicing costs are estimated to remain below 60 percent of the loan applicant's net income in a stress situation. When granting a loan, the so-called burdened loan service burden.
In the calculation, the maintenance costs of all the applicant's credits are taken into account as expenses. In the calculation, the loan repayment period is a maximum of 25 years and the interest rate is at least 6 percent, with the exception of long-term interest-protected and fixed-rate loans.
Fiva decided to further extend the validity period of the tightened loan ceiling, i.e. the maximum credit ratio for housing loans, which entered into force on October 1.10.2021, 85. The loan ceiling for buyers other than first-time home buyers remains at 90 percent and for first-time home buyers at XNUMX percent.
Fiva has been concerned about household indebtedness and has previously proposed a maximum debt ratio. Fiva reached its recommendation after the June 2022 issue Sanna Marini the government's presentation to the parliament on household indebtedness did not include the initially planned maximum debt ratio based on gross income. Fiva therefore recommends a maximum debt ratio, but it is based on the loan applicant's net income.
VTV has evaluated ARA's operations
The State Audit Office (VTV) has published an audit memo on February 7.2.2023, XNUMX regarding the activities of Housing Finance and Development Center ARA as a promoter of owner-occupied housing and wooden apartment building construction. ARA grants grants, subsidies and guarantees related to housing and construction, and directs and supervises the use of the ARA housing stock.
The demand for ARA apartments is maintained by population growth, affordable rents and low turnover of apartments. In big cities, the demand for affordable rental apartments granted on social grounds exceeds the supply. According to VTV, it is difficult to solve this demand with market-based housing production. The authorizations to approve interest subsidy and guarantee loans have been quite sufficient. The amount of construction is limited by the availability of reasonably priced plots and ARA's requirements for the cost and quality level of the projects.
According to the report, ARA's financial instruments do not always meet the needs of developers and financiers. The implementers of construction projects receive only a few offers from financial institutions for requests for tenders for long, i.e. 40-year interest subsidized loans. In the future, the only ARA lender may be Kuntarahoitois.
According to VTV, ARA and the Ministry of the Environment should find out the need and possibilities to finance rental housing companies in medium-sized provincial centers with ARA's interest subsidy loans. VTV also urges ARA to pay attention when granting funding to the risks caused by the combined effect of permanent restrictions on the use and transfer of right-of-occupancy apartments and predicted migration.
In addition, the report evaluates the policy goals set to promote the construction of wooden apartment buildings. ARA has promoted wood construction with, among other things, increased start-up subsidies. The report assesses the limitations of preventing wood construction, such as higher construction costs than concrete construction.
Maakarei change assessment work in progress
From the point of view of private law legal relations concerning real estate, the most important regulation is the Land Code, which entered into force at the beginning of 1997. However, after the entry into force of Maakaari and the partial reforms, the conditions related to real estate ownership and exchange have changed, which year it has been deemed necessary to assess the functionality of the current law and the need for changes.
On April 26.4.2022, XNUMX, the Ministry of Justice appointed a working group to prepare a proposal to assess the need for changes in the land arc regulations and to prepare the necessary changes to the law. The task of the working group is to prepare a proposal in the form of a government presentation on changing the land arch, taking into account especially the assessment memorandum prepared as official work at the Ministry of Justice on the needs for changing the land arch and the opinion feedback received from it.
In the same context, the ministry also appointed a monitoring group whose task is to monitor and evaluate the work of the working group.
The term of office of both groups lasts until the end of March 2023. Talonrakennusteollisuus ry has representation in the monitoring group, agent, VT Juha Terho.
Project goals
The goal of the working group is to take into account the changes in the operating environment, such as the spread of electronic transactions, which is especially important in terms of the transfer of real estate and the establishment of other rights related to real estate and their recording. This particularly applies to the assessment of the form requirements and implementation methods of written and electronic real estate exchanges, where the requirements of clarity, predictability and legal certainty related to real estate ownership must be taken into account. The means proposed to realize the goal must not prevent the fact that real estate sales can also be done in writing in the future.
The working group can make other proposals it deems necessary to clarify the regulation of land arcs and to increase the operational possibilities of real estate exchange and registration. However, the working group does not deal with the regulation regarding liability for errors in real estate transactions. In order to achieve its goal, the working group can, if necessary, present changes to other legislation resulting from the proposed changes to the land arc.
More information
director Anu Kärkkäinen, anu.karkkainen@rt.fi, 050-3376699
attorney Juha Terho, juha.terho@rt.fi, 050-5481610