Supervision release 24 February 2015 – 50/2015

Regulations and guidelines on the calculation of loan-to-value ratio enter into force on 1 July 2016

On 25 November 2015, FIN-FSA issued regulations and guidelines 3/2015: Calculation of loan-to-value ratio.

The objective of these regulations and guidelines is to describe the calculation of the loan-to-value ratio as referred to in chapter 15, section 11 of the Act on Credit Institutions in Finland, and thereby harmonise the concept of LTV in the market of housing loans for personal customers.

Loan-to-value (LTV) ratio refers to the loan amount granted in relation to the current value of the collateral security lodged as security for the loan at the time the loan is granted.

The maximum LTV ratio (or so-called loan cap) is a macroprudential tool which can be used to contain excessive household indebtedness and prevent a spiral of credit expansion and the inflation of market prices of assets used as collateral.

These regulations and guidelines, upon entry into force, repeal the following paragraph in FIN-FSA recommendation of 3 March 2010 "Safeguarding banks' long-term profitability and customer protection" J No 17/499/2010: "The risk of an increase in interest rates will also be reflected in the risk included in housing prices. FIN-FSA considers it important for banks to require an adequate self-financing share from customers in order to mitigate customer risk. In capital adequacy calculations, residential mortgage lending with a less than 70% loan-to-value (LTV) ratio is considered lower-risk. FIN-FSA invites the banks to abstain from financing home purchases for own use involving a higher than 90% LTV ratio relative to the market value of the property to be financed, with the exception of certain rare cases. In addition, these regulations and guidelines, upon their entry into force, repeal the following paragraph in the supervision release issued  by FIN-FSA on 8 June 2010 ("Supervision release on household housing finance"): "Considering the exceptional risks relating to the current economic situation from the customer's viewpoint, FIN-FSA continues to encourage banks to put emphasis on an adequate self-financing share for customers and to be cautious about personal customer housing loans with LTV ratios exceeding 90%.  (LTV ratio is the ratio of housing loan size to market value of the property to be financed). FIN-FSA stresses that, if loan decisions involve LTV ratios higher than those mentioned in this recommendation, such decisions should be preceded by a particularly thorough assessment, along with the applicant, of the applicant's repayment capacity and guarantees. Furthermore, FIN-FSA recommends that such decisions be made at a higher decision-making level."

The English-language translation of the regulations and guidelines has been completed. The corresponding Finnish-language supervision release was published on 3 December 2015.

Entry into force

The regulations and guidelines enter into force on 1 July 2016.

Further information

Tommi Orpana, Head of Division, tel. +358 10 831 5262 or tommi.orpana(at)


Regulations and guidelines 3/2015 (pdf): Calculation of maximum loan-to-value ratio