Moody's Says Finnish Authorities Are Right to Worry About Debt

(Bloomberg) -- Finnish authorities are right to be concerned about the level of household debt and loans to housing companies, according to Moody’s Investors Service.

Efforts to monitor and rein in the development are credit positive for Finland, the rating company said in a report published on Wednesday. Heavily-indebted households without savings are more vulnerable to rising interest rates, job and income losses, as well as falling house prices, Moody’s warned.

Moody’s, which rates Finland’s debt at Aa1, the second-highest investment grade level, with a stable outlook, said the comment is an update to markets and doesn’t constitute a rating action.

When Finns buy apartments, they effectively purchase shares in housing corporations that entitle them to control the home. That means they’re ultimately liable for any loans taken on by the housing corporations. The Financial Supervisory Authority has warned that banks’ current stress-testing models fail to account for the impact of rising interest rates on financial charges relating to loans taken on by housing corporations, which would affect the households’ debt-servicing ability.

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