The debt of single-person households has risen steadily throughout the 21st century. The number of people living alone with a debt of more than € 300,000 was more than nine times higher in 2019 than in 2002. The debt of two-person childless households has also risen in the same direction.
There were 4,311 single-person households with debt of more than EUR 300,000, of which 3,584 people have housing debt.
The largest housing debts are located in the Helsinki metropolitan area, where there were 17,314 housing debts of more than EUR 300,000. In the rest of the country, there are a total of 13,097, of which 3,305 are located in Uusimaa outside the Helsinki metropolitan area.
There are 1,774 single people living in Finland with a housing debt of at least EUR 300,000, of whom 1,155 are in the Helsinki metropolitan area.
The statistics have been obtained from Statistics Finland, and housing debtors of at least EUR 300,000 have been separated from them.
In many households, the total debt can exceed 300,000 euros if the loan has been taken out for business or studies, for example.
Read more: Giant debts on the rise: More than 60,000 households have debts of more than 300,000 euros
Although the debt burden of one- and two-person households has increased, the largest debts remain with larger families. Families with at least two adults and one child have the largest number of housing loans of more than EUR 300,000, as there are 18,745 such households in Finland.
Ville Voutilainen, an economist at the Bank of Finland, has studied Statistics Finland's statistics and says that the amount of large debts in single-person households and childless households with two adults has grown faster than average during 2002–2019. Overall, debt growth was strong, especially in the first decade of the millennium, but has moderated somewhat since then.
Voutilainen naturally finds the main reason for the increase in indebtedness is the price development of housing in growth centers and the fact that the size of housing units has continued to decrease.
- In the Helsinki Metropolitan Area and in Turku, for example, house prices have risen sharply. They are areas that people move to, so as housing prices rise, more debt is taken, Voutilainen says.
Housing prices have risen again, especially in coveted studios and one-bedroom apartments.
- The increase in the amount of debt in the homes of two highly indebted adults has been as rapid as that of those living alone.
The debt of EUR 300,000 for a single person is very high
According to Voutilainen, the debt of 300,000 euros for a person living alone is already very high, but debt growth is clearly not a bad or good thing. However, there has been a change, and today an increasing proportion of debt is borne by households with high debt-to-income ratios.
For highly indebted people, personal risk can be high, but Voutilainen points out that debt is an integral part of a functioning economic system.
- Debt is needed to offset the costs of large purchases over the life cycle. The fact that debt is increasingly being packaged into higher debt categories is a matter of concern. As debts have grown large, crises have become deeper. Research into the link between debt and crisis continues.
Many countries have tried to curb the growth of individual indebtedness, says Voutilainen.
Mortgage growth will not pose a threat to personal finances as long as house prices and other asset values continue to rise. Rising house prices will increase the wealth of the indebted, but a crisis like an economic downturn and a possible bursting of the housing bubble will be a greater threat the higher the debts of individuals.
300,000 debt requires a net monthly income of at least about 3,200 euros
Kaisu Christie, OP's Director of Housing Finance and Housing Services, says that there are always more factors involved in obtaining a loan. The key is the risk considered by the bank and the borrower's ability to pay, ie income and expenses combined.
One of the clearest conditions for obtaining a loan is adequate monthly earnings and the fact that you have serviced your previous debts with honor. For example, if you are applying for a large mortgage loan of EUR 300,000, the calculated net monthly earnings must be at least EUR 3,200. Christie points out that this is an example calculation, and other factors can affect access to a loan.
In addition, the bank imposes a deductible of at least 15% of the purchase value of the home or, in the case of the first purchaser, a deductible of 5%.
- In theory, even the first buyer can buy an apartment for more than 300,000 euros, if the conditions are met.
Christie says the locality does not determine what kind of loan you can get. Although apartment prices in Helsinki will rise on average more than in Rovaniemi, the key for the bank is whether the borrower can repay the loan.
In addition, the loan alone or together can be obtained on the same terms, but Christie says the two-payer’s apartment is a lower-risk option, according to the bank. It can be seen in how the bank pricing the risk.
According to Christie, it is possible that some of Statistics Finland's large mortgages may cover more than one dwelling.
- Of course, it is possible to combine mortgages, for example, so that the investment home and your own home are on the same loan. However, they are more likely to be a mortgage on just one apartment, as a large proportion of large mortgages are located in areas that are more expensive anyway.
However, Christie emphasizes that she does not know the data behind Statistics Finland, but talks about debt consolidation at a general level.