Norway poised to relax banking rules

Norway is moving closer to easing mortgage lending standards as the nation's deflating property market prompts concern among lawmakers that existing regulations are too tight.

Real estate prices, which have doubled over the past decade and touched a record high this year, are now dropping faster than the central bank had predicted.

The Conservative-led government, which won power in September, says it is now looking into raising the amount banks can lend to borrowers to 90 per cent of a property's value, from 85 per cent previously, in an effort to support first-time buyers.

"Norwegian banks are already in a good position," Hans Olav Syversen, the head of the parliamentary finance committee in Oslo and a member of the Christian Democrat party that the government relies on to rule, said in an interview last week.

"We're asking for a more flexible rule. A 10 per cent down-payment should be enough if banks take into account individuals and their own ability to pay their debts," he said.

Norway's housing market, which Nobel laureate Robert Shiller said last year was in a bubble, has been inflated by a period of record-low interest rates that fuelled a borrowing spree in Scandinavia's richest nation and left Norwegians more indebted than ever before.

Households now owe about twice their disposable incomes to their creditors, a level the central bank and the financial regulator has warned is unsustainable.