Surge in Mortgage Collections: A Deep Dive into Norway’s Growing Debt Crisis

Surge in Mortgage Collections: A Deep Dive into Norway’s Growing Debt Crisis

Rising Mortgage Collections in Norway

The Financial Supervisory Authority of Norway recently published figures for the first half of the current year, revealing that 7.8 billion of Norwegians’ mortgages have ended up at collection agencies. This represents a significant increase of 15.3% compared to the end of 2022. The data indicates that about half of the collection claims are attributed to age groups 30-39 and 40-49 years, with 15% of the claims going to the youngest age group (18-29 years).

The Burden of New Mortgages

The report shows that 35% of the mortgages that have gone to collections were taken out less than a year ago, marking a 4% increase from the end of 2022. This implies that many borrowers are struggling with their mortgage payments at the onset of their loan period. Consumer economist Cecilie Tvetenstrand, from Storebrand, suggests it is young people between 29 to 39 years in the establishment phase who are struggling the most.

Impact of Rising Interest Rates

Since September 2021, the Bank of Norway has raised the key policy rate 12 times, from zero to 4.25%. For most mortgage borrowers, the loan rate is over 5%. With another rate hike expected, possibly in December, the debt burden will only increase.

Advice for Struggling Borrowers

Tvetenstrand advises anyone struggling to pay their mortgage to contact their bank immediately, honestly discuss their financial situation, and ask for help to find solutions. She warns against waiting until the loan goes to collections and suggests taking control of the financial situation before it reaches that point. If the loan goes to collections and the claim is defaulted, it could end up with the enforcement officer, who could, in the worst case, demand a forced sale of the house.

Reactions from the Financial Sector

Eddy Kjær, director of collections in Finance Norway, agrees with Tvetenstrand’s assessment of the situation, stating it’s serious that even more groups than before are affected by the economic situation. He doesn’t think any single party can be blamed for the increasing number of mortgage borrowers ending up in collections. He mentions job loss as one possible reason for people being unable to service their debt.

The Path to Forced Sale

Both Tvetenstrand and Kjær advise those whose mortgage goes to collections to contact their creditors. It’s only when you default on the claim that the enforcement officer can force you to sell your house. According to Kjær, the path to a forced sale is quite long, typically taking two to three months before the enforcement officer can process the case. During this period, there’s an opportunity to discuss with the creditor.