The boss of trade union confederation LO, Gerd Kristiansen, is among those now claiming that Norway’s economy is in crisis because of rising unemployment. Local banks, meanwhile, admit that thousands of Norwegians are now having trouble paying their mortgages, while many borrowers say they won’t be able to make payments if interest rates were to rise.
On the eve of an important meeting on interest rates by the executive board of Norway’s central bank, more alarms are ringing over the consequences of cutbacks in the oil and offshore industry. Newspaper Dagsavisen reports that more than 9,000 borrowers in Rogaland County on the West Coast, the area hit the hardest by the cutbacks, have applied to their banks to request suspension of principal payments on their home loans. They claim they can only afford interest payments.
New figures show unemployment in Rogaland at 4.9 percent, up from 3.3 percent at this this time last year. The numbers remain relatively low compared to many other countries, but for Norway, which has had a strong labour market for years, the increase is worrisome.
Gaute Thise Jacobsen, regional director of SpareBank1 ST Bank in Stavanger, told Dagsavisen that he and his colleagues are now having different types of “conversations” with customers than in previous years. “They’ve had quite high incomes and built up high consumption,” Jacobsen said. “Then they lose their job and need help to manage their consumption.” He said the bank has to ask them “what’s absolutely necessary? What’s okay? What’s damaging? These types of conversations can be tough.”
Statistics from January showed that around 4,700 of the bank’s 64,000 mortgage customers had some form of exemption from paying down their loans. That’s up from 3,900 last year. In February, an additional 1,000 customers were granted permission to only make interest payments, meaning there is no reduction in their debt.
The situation is similar in the county of Møre og Romsdal, farther up the coast, but different in Bergen, where “against all the odds,” fewer loan customers are requesting lower mortgage payments. That reflects the sharp regional differences within Norway’s economy that state welfare agency NAV has highlighted in its reports on unemployment.
Kristiansen of LO and Trond Giske, a former government minister and Member of Parliament for the Labour Party, stress that Norway is reaching its highest number ever of people out of work this year. “There’s no question this is a crisis,” Giske told Dagsavisen.
Little tolerance for any interest rate rise
Others continue to downplay any talk of “crisis,” with even the hard-hit oil industry itself admitting that while as many as 50,000 jobs may disappear by the end of next year, they’ll start reappearing around 2018, when the industry is expected to rebound. Several oil industry analysts believe oil prices have bottomed out and will gradually rise, while state statistics bureau SSB reported last week that Norway faces “luxury problems” that can be addressed. For those losing their jobs in Western and Southern Norway, it’s a personal crisis, but the Norwegian economy overall is “going quite well,” according to SSB. The situation for the economy is “serious,” said SSB’s new director Christine Meyer, “but there’s no crisis.”
Nine out of 10 economists polled by newspaper Dagens Næringsliv (DN) responded that SSB is “too positive.” They predicted the central bank will lower rates again on Thursday, down to 0.5 percent, and that they may reach the zero point, suggesting real negative interest rates.
While that may provide some relief to those struggling with mortgage debt, another survey conducted by Respons Analyse for SpareBank1 Gruppen raised another major concern. Only 30 percent of borrowers questioned said they could tolerate an eventual rise in interest rates of around five percentage points. That would raise current mortgage rates to 5-6 percent, a level long considered “normal” in the banking world. Fully 300,000 mortgage holders, and their banks, may run into trouble if interest rates rise.
“That’s an incredibly high number,” Magne Gundersen, consumer economist at SpareBank1 Gruppen, told news bureau NTB. “And most surprising is how this is the picture at a time of record low rates.”