Finland extends home loan terms to 40 years – bank warns of consequences

From 1 June, Finnish residents can apply for home loans with terms of up to 40 years, which reduces monthly payments. However, the Bank of Finland warns that a longer loan period will lead to rising property prices and increased debt burden.

A change taking effect on 1 June in Finland will allow home loans with terms of up to 40 years. Previously, a shorter maximum term was the standard, but now homebuyers can spread loan payments over a longer period, thereby reducing their monthly financial obligations.

The aim is to make home ownership more accessible, particularly for young people and those whose income does not allow for large monthly expenses. With lower monthly payments, it is hoped that more people will be able to afford a home loan.

The Bank of Finland, however, is critical of the change. According to the central bank's assessment, a longer loan period does not solve the actual housing affordability problem but rather exacerbates it. Bank experts say that increased borrowing capacity will lead to a general rise in property prices, making housing ultimately even more expensive.

In addition, the Bank of Finland emphasizes that a 40-year loan agreement means significantly higher interest costs for borrowers over the entire period. Longer-term loans increase households' total debt and make them more vulnerable to potential interest rate rises or economic downturns.