House price inflation has picked up recently. Although household credit growth has slowed somewhat over the past year, household debt is still rising faster than income. Corporate credit growth is moderate. There has been some increase in banks’ loan losses.

High house price inflation may lead to higher growth in household borrowing, increasing household sector vulnerabilities, with a higher risk of an abrupt decline in demand and bank loan losses further ahead. On the other hand, continued low growth in the Norwegian economy may dampen credit growth in both the household and corporate sector.

“On the basis of an overall assessment, Norges Bank has decided to advise the Ministry to keep the buffer rate unchanged at 1.5 percent”, says Governor Øystein Olsen.

The Ministry of Finance decided today to keep the buffer rate unchanged. (Ministry of Finance press release)

Norges Bank's letter: Advice on the countercyclical capital buffer 2016 Q3