Norway has strong safety nets for health, unemployment and pensions. But for the housing economy — the largest financial commitment most people take on — households bear almost all the risk themselves. Floating interest rates that change overnight, full debt liability even after a forced sale, and one of Europe's strictest paths out of debt.
Over 90% of Norwegian mortgages have floating rates. When Norges Bank raised the policy rate from 0 to 4.5%, couples with children saw an average of NOK 66,000 more in net interest costs (SSB, 2024). In the US, France, Belgium and Denmark, the majority of borrowers have fixed rates — typically 15 to 30 years. Interest rate changes do not affect them during the contract period.
In Norway, the bank can sell the property upon default and still claim the remaining debt. You lose your home and are left with debt. In 12 American states, including California, it is the bank that takes the loss when property values fall below the outstanding mortgage. Ghent and Kudlyak (2011) showed that banks adapt by pricing the risk into the interest rate.
Norway's Debt Settlement Act requires five years on a minimum budget — among the strictest in Europe. In the UK, the debt restructuring period is one year; in Canada, nine months; in the US, three to four months. Research across 27 countries shows that shorter debt restructuring periods correlate with higher entrepreneurship.
Rojas (2022) found that people burdened by debt had 2.5 times the suicide risk of the general population, controlling for mental illness and other factors. Norway's action plan for suicide prevention does not mention debt problems as a risk factor.
Banks offer fixed rates for 15, 20 or 30 years. The household knows what the home costs the day they sign. The rate will be somewhat higher than the floating rate — that is the price for being shielded from interest rate shocks.
If the housing market falls and the borrower cannot service the debt, they lose the home — but nothing more. The bank takes the loss and prices it into future lending. This is the standard arrangement in much of the world.
Debt restructuring periods down towards two years. People whose finances have been destroyed should be able to return to work and productive life within a reasonable time.
Today we regulate banks heavily because households bear all the risk: lending regulations, stress test requirements and the debt registry exist as compensation for a fragile system.
When banks themselves bear interest rate risk and property price risk, they have a self-interest in lending responsibly. The need for detailed regulations and stress test requirements from the Financial Supervisory Authority is reduced. The banks' own loss-bearing is a stronger disciplining mechanism than regulation.
The state has spent large sums on crisis packages in recent years — NOK 50 billion in electricity subsidies, and EU countries a combined EUR 758 billion in energy subsidies. When interest rates rose just as sharply, there was no corresponding compensation. A system with built-in stability reduces the need for such ad hoc measures.
L. C. Praxis has written a thorough review of the research behind these proposals — on interest rate risk, debt liability, debt restructuring and the relationship between debt and health.
Housing policy is closely linked to the tax reforms — the capital account, documentation fee and wealth tax directly affect the housing market.