Saving, borrowing and payment methods in Finland

Transcription

1 0 Federation of Finnish Financial Services

2

3 Contents. INTRODUCTION. Purpose of the survey. The survey in practice. SPENDING PLANS AND CURRENT FINANCIAL SITUATION. SPENDING PLANS AND TARGETS, FUNDING OF STUDIES AND APARTMENT. Home purchase financing plans 8. Intentions of financing studies. SAVING AND INVESTING. Current savings and investment vehicles. Saving and investment intentions. Criteria for choice of savings and investment vehicle. Arguments relating to investment. BORROWING 0. Present forms of credit 0. Borrowing plans. Shopping around for interest rate on existing home loan. Intentions to ask for home loan quotes. Home loan periods 8. Home loan amounts. Amounts of home loans raised in the past two years.8 Proportion of home purchase financed with loan. Proportion of take-home income absorbed by debt service costs. Changes in loan repayment plans. ECONOMIC AND HOME LOAN RELATED RISKS 0. Preparing for rises in interest rate 0. Capped rate loans. Loan insurance and life insurance. PAYING BEHAVIOUR. Internet use. Bill payment methods. E-invoice services 8. Other online banking services 0. Paying for daily shopping

4 Summary The results of the study clearly reflect the financial situation at the time the survey was made. Overall financial uncertainty has continued for more than a year, but consumers show signs of regaining confidence in Finland s economy as well as in their personal economy. Consumers prepare for the possibility of financial risks especially by saving money. The continuing low interest level is reflected in the borrowing intentions of consumers. Most Finns plan their economy for six-month periods at most. Approximately ten percent do not plan their spending at all. Plans for a period of one year or more are made by roughly one out of five. Most Finns have larger income than expenses. About a third have equal income and expenses, but one out of ten exceed their income. Two percent of Finns have to resort to borrowing to cover their expenses. Consumers are much more confident in making spending plans than a year earlier. There has been increase in all areas of spending, which is a sign of confidence in the future. Working is the most important means of financing studies. Among 8 year-old students, the significance of student loans has been decreasing over a long period of time, but has now increased slightly. Saving and investing continue at a high level. Placing assets in more than one vehicle at the same time has been more common than last year. Saving and investing intentions have continued their upswing as well. A bank or investment account is still the most popular form of saving, but the popularity of both mutual funds and equities is on the rise. The growth in saving and investment intentions indicates that consumers have partly regained their confidence in their personal financial development, but without question also that they want to accumulate an economic buffer for the future. Like before, security is the most important criterion and low risk the second most important criterion for the choice of a savings or investment vehicle. These criteria are followed by ease and return of the vehicle. Ethical and ecological aspects are valued slightly more than e.g. provision for retirement. Finns would rather accept a low return to preserve the value of the capital invested, than risk losing part of the capital invested to make a good profit. Borrowing is on relatively secure grounds. Many borrowers also have savings or investments. Their proportion has slightly grown over the years. The savings act as a good buffer in case of increased need for money in the future.

5 The number of home loan holders has slightly decreased from last year. However, the number of those who have taken a home loan for the renovations of their current house or apartment has increased. The number of consumer credit holders has slightly increased. Most borrowers hold only one consumer credit at a time. Yet nearly one third hold two, one out of seven hold three, and four percent hold even more simultaneous consumer credits. Partly because of the low interest rates, the willingness to borrow has slightly increased from last year. The increase in borrowing intentions is present in all forms of credit. Home renovation intentions have also increased from last year. Shopping around for interest rate on current home loan is slightly less popular than last year. While shopping around for best interest rate on a home loan it is more popular to ask two banks for quotes than to ask three or more banks. Borrowers most frequently ask only their principal bankers for a quote, however. The average repayment periods of home loans have begun to shorten. The average size of home loans has ceased to grow. The slowdown is in particular present in new home loans that have been taken during the last twelve months. The average growth of consumer credits has also stopped. The proportion of loan financing out of home purchase payments has decreased slightly from last year, but is higher than in 008. The proportion of take-home income absorbed by debt service costs has stayed the same since 00, although the average size of home loans has grown during this time. This is partly the result of falling interest rates, which have decreased average debt service costs. The amount of Internet payments has slightly increased, if those who use online banking as their secondary payment method are also taken into account. There is increase especially among respondents aged years or older. The use of e-invoice services has continued to grow. Interest in e-invoice services has also continued to increase among those who have not used e-invoices before. Respondents awareness and knowledge of e-invoices have also clearly improved. Card payments have continued to increase their popularity at the expense of cash payments. Visa Electron use has increased among respondents younger than 0, but decreased in the age group 0 years. The results of this report are parallel to other available statistics and the results of the Consumer Survey by Statistics Finland.

6 . Introduction. Purpose of the survey Money spending in Finnish households has been surveyed by the Federation of Finnish Financial Services (and its predecessor Finnish Bankers Association) since at intervals of to years. The survey was made twice a year between the years 00 00, and once a year after 00. Since autumn 00, the interviews have been conducted via telephone. The purpose is to outline recent changes in Finns saving, borrowing and paying behaviour. This time focus was also on supplementary pension insurance and new forms of long-term saving. This year s survey compares the results to earlier surveys where applicable. The preceding survey was made in spring 00. The Federation has previously conducted an annual survey concerning the money use, indebtedness, saving, paying behaviour and general financial awareness of Finnish adolescents aged to 8. This year no such separate survey was made, but the long-term trends of spending behaviour among to 8-year-olds are examined individually in some of the sections of this report.. The survey in practice The survey material was gathered in January and February 0, when a total of,00 persons between and years were interviewed in various parts of Finland. The sample is large enough for reliable comparison with the country s population. The number of persons aged between and in Finland is,,000. When interpreting the results of this survey, the reader is advised to take into account the impact of the situation prevalent at the time of the interviews. The turmoil in financial markets, which has continued for more than a year, shows signs of recovering general confidence in economic development. Consumers prepare for potential financial risks especially by saving. The continuing low interest rate level is reflected in their borrowing intentions. The interviews were conducted for the Federation of Finnish Financial Services by IROResearch Ltd. The report was written by Riitta Kuhno, Research Manager, IROResearch Ltd, and Ulla Halonen, Special Adviser on Financing, Federation of Finnish Financial Services. This English translation is a slightly abridged version of the Finnish report.

7 . Spending plans and current financial situation This year the interviewees were also asked the span of their spending plans. Half of the respondents said they make short-term spending plans, for a maximum of six months at a time, and over ten percent make no plans at all. Spending plans that cover a period of one year or more are made by a bit less than twenty percent. The proportion of Finns who make long-term plans increases with age, being at its highest at ages 0, when more than one out of four make plans for a period of years. Persons under years old make significantly shorter spending plans than the older age groups, and % of persons below 8 years old do not yet plan their personal finances. As home loans get more common at 8 years old, long-term planning of personal finances becomes topical. Financial planning lessens again after the age of 0. One out of four 0-year-olds make no spending plans. When different stages of life are compared, people who have already retired are the least likely to plan their finances. Figure a. Spending plan time frame. How long periods of time do your spending plans usually cover? % of respondents (n=, in 0) One month or less. At least one month, but less than three months. At least three months, but less than six months. At least six months, but less than a year. years. I don t plan my spending at all. Cannot say Figure b. Spending plan time frame by age group. "How long periods of time do your spending plans usually cover?" % of respondents (n=, in 0) 0 % % % % 8 0 % % All age of respondents, years Max month - months - months - months - years Doesn t plan at all

8 This year s survey also investigated the respondents current financial situation. They were asked to choose the option which best suited their current situation. More than half of the respondents had higher income than expenses, which makes saving an option. Roughly one third had equal income and expenses, but one out of ten exceed their income. In this group, most abide by using their savings (a proportion of 8% out of all respondents), but according to the survey, a whole two percent of Finns have to resort to borrowing in order to cover their expenses. The results show large variation between the different age groups. The proportion of persons whose income exceeds expenses is higher than average in all groups over years old, while under the age of this proportion is lower than average. Ages 8 will more often spend all of their income, and it is also more common for all under -year-olds to draw on their savings to cover expenses. The proportion of those who take an extra loan to cover their expenses is as high as six percent in the group aged 0 years. Persons who are unemployed or have been laid off more frequently have equal income and expenses or cover their expenses with their savings. Financial situation also correlates with family status: childless couples, and couples whose children have already moved away, more often have higher income than expenses, whereas singles more often draw on their savings or take an extra loan to cover their expenses. Figure. Current financial situation "Which of the following describes your current financial situation?" % of respondents (n=, in 0) My income is larger than my expenses. My income and expenses are equal. My expenses exceed my income; I use my savings to cover my expenses. 8 My expenses exceed my income; I have to borrow money to cover my expenses. Cannot say

9 . Spending plans and targets, funding of studies and apartment Consumers are much more confident in making spending plans than a year ago. A total of 8% of respondents currently plan on using money on some purchase or purpose during the next months an increase of five percentage points from spring 00. Compared with the whole population, those aged 8 years make significantly more spending plans: % of adolescents and young adults are going to use their money on some specific target during the next twelve months. The results are parallel to the Consumer Survey by Statistics Finland, according to which consumers opinions on the affordability of durables have changed for the positive by this year s first half. Consumers are always more careful during a recession, but confidence in consumption will likely increase after the recession has passed. Figure a. Intentions to buy in months time Which of the following are you planning to spend on during the next months? Vacation Sports and outdoors equipment Consumer electronics Basic repairs of house or apartment Furniture Household appliances Purchase of car or motorcycle Studies Purchase of computer Purchase of house or apartment Basic repairs of holiday home Purchase of holiday home Other purchase No specific intentions % of respondents (n=, in 0)

10 It serves to notice that the shares of all spending targets have increased from the year before. The most common expenses have, however, stayed in the same order. A vacation is still the most common target of spending with % of Finns including it in their spending plans. Nearly one third purchases sports and outdoors equipment, and slightly more than 0% buy consumer electronics. Home renovation is planned by 0% and the purchase of a house or apartment by seven percent. The proportion of those planning home renovation has gone up by four percentage points. House or apartment purchase intentions have also increased by one percentage point since last spring. A new spending target this year is the basic repairs of a holiday home, which is planned by six percent of the respondents. The purchase of a holiday home has remained at the same level of two percent from last spring. The different age groups show great variation in their spending plans. Those aged or younger focus their money use on their studies and on consumer electronics, and the proportions of the two areas are both significantly larger than average among all younger than years. Intentions for the purchase of a house or apartment are most common at the age of 0 8 years, while home renovation is more common in the age group 0 years. Finns of all ages have intentions to spend on vacations, but travelling is especially accentuated among those years old. All in all the number of spending plans appears to shrink significantly after the age of years. There is also some variation between genders: vacations, furniture and studies are more frequent in women s plans, while men are more inclined than women to plan the purchase of a car, motorcycle, computer, or consumer electronics.. Home purchase financing plans Those with intentions to buy a house or apartment were asked which financing methods they considered the most important. The significance of an ordinary bank loan as the most important financing method has diminished slightly and other financing methods have increased their significance. A year ago % of persons with intentions to purchase a home answered they were planning to finance the purchase with an ordinary bank loan, and now their proportion is %. The use of current apartment s sales revenues as a financing method has on the other hand gone up by six percentage points. Now one out of six with home purchase plans told they were planning to finance the house or apartment with sales revenues from their current home. Slightly more than a year earlier, one out of ten intends to finance their home purchase mainly with other savings, and the proportion of ASP loans/savings has also gone up by a notch since last spring. When comparing the two years results, it should be noticed that the proportion of those who answered cannot say was six percent smaller this year. Likewise, if all the financing methods used for home purchase are examined in addition to merely the most common one, the significance of an ordinary bank loan is higher than last year. ASP (asuntosäästöpalkkio) = an incentive interest bonus for young people saving for their first home. 8

11 Figure b. Home purchase financing methods How do you intend to finance your home purchase? Choose the most significant financing method. % of those who are planning to buy a house or apartment (n= in 0) Ordinary bank loan Sales revenues from current home Other savings ASP savings / ASP loan Funding from parents/relatives Inheritance funds Other means Cannot say The portion of an ordinary bank loan in financing the purchase of a home is largest in the group aged 0 8 years. Looking at the whole group of young people aged 8 it becomes evident that the proportion of ASP savings/loans has grown at the expense of ordinary bank loans. In the course of months, the significance of the ASP has risen from three to nine percent among first-time home buyers. After the terms and conditions of the ASP system were changed last June (8/00), young people have become more interested in ASP savings and loans.

12 . Intentions of financing studies Those who had intentions to use money on studies were asked which financing methods they considered the most important. The proportions have stayed very much at the same level with last year. Working is the most important means of financing, and is the main source of money for % of students. Study grant is used by slightly more than one out of five, and six percent have a student loan. Figure a. Financing of studies What methods do you use or plan to use to finance your studies? What is your most important source of financing? Working Study grant Funding from parents/relatives Own savings Student loan Other means Cannot say % of those who are planning to spend on studies (n= in 0) If the results of adolescents and young adults aged 8 years are looked at separately from the rest of this study s material, slightly more than one third of the respondents work fulltime, and similarly slightly more than one third are full-time students. A bit over 0% of the respondents both work and study. Working while studying is more common especially among university students, but also among students of applied sciences or other higher education institutions. Young people also regard work as the central means of financing studies. At the moment % of young people say they finance their studies mainly by working. Study grants have also maintained a steady level of importance since spring 00, and continue as the second most important source of financing, with %. The third most important financing method is funding received from parents and relatives. Its significance has continuously grown since 00 and is now %. Over a long period, the significance of student loan for 8 years old students fell until last year, but now it has risen by two percentage points to eight percent. The significance of working as the main source of funding for studies is greatest in the age group of 8 years, all in all %, which is an increase from the year before. Because working while studying is most common among university and other higher education students, they also more frequently finance their studies with their salary. For younger respondents, -year-olds the funding

13 received from parents is the main source of financing for their studies. Currently % intends to study with the help of money from parents or relatives, showing increase from last year as well. Figure b. Financing of studies by age group 0 How do you intend to finance your studies? Which is the most important? % of those who spend money on studies in Student loan Study grant Funding from parents/relatives Own savings Working - years (n=) 8- years (n=8) 0- years (n=8) -8 years (n=) - years (n=) - years (n=0) 0- years (n=) Figure c. Financing of studies by age group 00 How do you intend to finance your studies? Which is the most important? % of those who spend money on studies in Student loan Study grant Funding from parents/relatives Own savings 8 Working - years (n=) 8- years (n=) 0- years (n=0) -8 years (n=) - years (n=) - years (n=) 0- years (n=)

14 . Saving and investing. Current savings and investment vehicles Finns interest in saving has not abated. Saving and investing began an upswing in 00 and continued their rise up until last spring. At the moment % of Finns have savings or investments in some vehicle, while last year their volume was 8%. It serves to notice, however, that savers and investors have placed their assets in multiple vehicles more often than a year earlier. Related to the sample population the proportion of savers represents. million Finns. The amount of savers has increased in the groups in which it is also most common, i.e. ages and over years old, but other age groups show slight decrease. Saving is, self-evidently, more common in higher-income households. The phase of life also has an effect on saving; the smallest volume of savers and investors are located in single households, but families with children also have more limited saving opportunities than childless couples and couples whose children have already left home. Profession and education also reflect on the prevalence of saving. Students and those who are unemployed or have been laid off save significantly less frequently than those in a professional or managerial work position. Similarly saving is much more common among the higher educated than among persons with only basic education. A bank or investment account is still the most popular form of saving at the moment in spite of the low interest level. The proportion of people with saving or investment accounts is the same % as a year ago. Current accounts come as the second most popular form of saving with a slightly increased proportion of %. Mutual funds are the next most popular saving vehicle after bank deposits. The proportion of savings in mutual funds has grown slightly from last year and is now 8%. A proportion of % of Finns says they invest in listed shares, while last year their proportion was two percentage points less. The popularity of personal pension insurances as a saving outlet has maintained the same level for several years now, but there has been slight increase in endowment insurances. The popularity of real estate investments has likewise grown from last year.

15 Figure. Saving and investing by age group Do you hold savings or investments at the moment? 0 % of respondents (n=, in0) All years Current account Mutual funds Account saving is popular in all age groups, but both bank and investment accounts, and current accounts in particular, become more common forms of saving with age. The proportion of people who save in listed shares increases noticeably after the age of 0 years. Compared with women, men are also more interested in listed shares. Mutual funds on the other hand interest both genders alike. Mutual funds savers are frequent in all age groups, gaining prominence right after the age of years. Saving in personal pension insurance takes off right after the age of 8, and most savers in personal pension insurance are found in the age group 0 years.

16 Figure a. Current savings and investment vehicles Do you hold savings or investments at the moment? Yes [ % of respondents by year ] % of respondents (n=, in 0) 8 "Which of the following do you hold?" Current account Savings, investment or other account Mutual funds Listed shares Bonds Endowment insurance Personal pension insurance Real estate investment (other than principal residence) Other securities Real estate (land or forest)

17 . Saving and investment intentions Saving and investment intentions have continued their increase and are now higher by three percentage points from last spring. Now over half of Finns plan to save or invest within the next months. This not only indicates that consumers have confidence in their personal financial development, but also without question that they wish to accumulate their economic buffer for a rainy day. The Consumer Survey similarly reveals that in spite of the recession, households have had good saving opportunities all through the second half of the past decade. Two thirds (%) of Finns who already have savings or investments reported that they were going to continue saving or investing. The number is still on the rise, as one year ago % of savers and investors were planning to continue saving or investing, and in spring 008 their proportion was %. The growing number of new savers also tells of continuing interest: the number of people who had no savings or investments at the moment, but were going to start saving within a year, has increased to 0% by five percentage points from last spring s %. This upward trend has continued since 00, when the number was 0%. Savings and investment accounts are once again clearly the most popular form of saving, with % of people planning to use these accounts, same as last year. The second most popular form of saving is a current account. Its proportion has also maintained roughly the same level as last spring. The unmistakably growing popularity of mutual funds and equities, which was already evident in the current savings and investment vehicles, can also be seen in saving and investment intentions. Interest in mutual funds has risen by two percentage points to %, but the relative proportion of equities has increased even more over the past few years. This year the proportion of plans to save in equities is eight percent, an increase of three percentage points from last spring. Interest in personal pension insurance has held the same level for several years and stands at the same five percent this year, as well. Saving and investment intentions are at their highest in the age group years. Over 0% of the group have plans to save or invest during the coming months. They are also significantly more often interested in both mutual funds and listed shares than the average. More than half of the Finns who have savings or investments, or who plan to save or invest during the coming year, are saving into a reserve fund or for a rainy day. The second most popular use of savings or investments is consumer goods, reported by 8% of respondents. Nearly a quarter saves or invests for retirement, and every sixth for a house or apartment. All uses of savings and investments show distinct increase from the year before. On average, the most growth five percentage points took place in saving for consumer goods and for retirement. Age naturally has a role in the purposes of saving. More often than average, respondents aged 8 8 years were saving for a house or apartment, respondents younger than 0 years (especially younger than 8 years) were saving for consumer goods, respondents aged years were saving into a reserve fund or for a rainy day, and respondents aged years were saving

18 for retirement. High and low income households both equally save for a rainy day, but saving for retirement is more common than average for people with higher income. People saving into reserve funds typically have sizeable home loans of more than 80,000, in which they perceive risks. The savings are then used as a buffer in case of increased need for money in the future. Figure b. Saving and investment intentions Do you intend to save during the next months? % of respondents (n=, in 0) Yes [ % of respondents by year ] IN WHICH OF THE FOLLOWING ITEMS DO YOU PLAN TO SAVE OR INVEST? 8 Current account Savings, investment or other account 8 Mutual funds 8 Listed shares 8 Bonds 0 Personal pension insurance Endowment insurance Real estate investment (other than principal residence) Real estate (land or forest) Other No answer

19 Figure c. Use of savings and investments For what purpose do you intend to use your savings or investments? For a rainy day Consumer goods Retirement Home purchase Inheritance Holiday trip Home renovation Studies Other Cannot say % of respondents with savings or investments, or intentions to save or invest (n=, in 0) Criteria for choice of savings and investment vehicle Security continues to be the most important criterion for the choice of savings and investment vehicles, and the second most important criterion is low risk, same as before. The third most important criterion, ease of savings or investment vehicle, is valued slightly more than last spring. The significance of return, the fourth most important criterion for choice, fell noticeably a year ago and has stayed at the same level since. A year ago the impact of nearly all criteria for choice of savings or investment vehicle had decreased. Now there has been some increase, but the levels of spring 008 are yet to be reached. The only criterion to have kept its importance since 00 is provision for retirement. Whether pensions are sufficient and what provisions people should make for retirement have been frequent topics in the media, as the large post-war generations are retiring on pension. This year the respondents had two new criteria to pick from regarding the choice of savings and investment vehicles. The two new criteria ethical aspects and responsibility, and environmental aspects are valued slightly more as criteria for choice than e.g. provision for retirement. Ethical aspects are valued most in the group aged years, out of which nearly 0% say their choice of savings or investment vehicle is influenced by ethical aspects. Ecological aspects seem to be most important from the age of 0 onwards, out of which more than one third say it has a significant role in their choice of savings or investment vehicle.

20 Figure d. Criteria for choice of savings and investment vehicle How much was your choice of savings or investment vehicle impacted by the following factors? % of respondents (n=, in 0) Security February 00 February 00 January 008 January 00 January Low risk January 008 January 00 January Ease February 00 February 00 January 008 January 00 January Return February 00 February 00 January 008 January 00 January Cashability February 00 February 00 January 008 January 00 January Fluctuation of value February 00 January 008 January 00 January 0 0 Tax benefits February 00 February 00 January 008 January 00 January Ethical aspects, responsibility January Provision for retirement February 00 February 00 January 008 January 00 January Ecological aspects January 0 0 Investment period February 00 February 00 January 008 January 00 January % 0 % 0 % 0 % 80 % 0 % A lot Somewhat Not at all Cannot say 8

21 . Arguments relating to investment There were two new questions in the survey in the form of arguments relating to investment. The respondents were asked to choose whether they agreed or disagreed with the arguments. In actual fact the arguments concerned the same matter from two opposite points of view. Most people want to gain profit, but few are prepared to take great risks. Less than one third of Finns would be prepared to lose part of the capital invested to make a good profit. Men are prepared to take more risks than women. The willingness to take risks noticeably lessens after the age of 0 years. The group of investors most confident in risk taking also hold significantly more equities, and also slightly more often than average invest in mutual funds. Security has consistently been the criterion to hold most importance to Finns. Their goal of saving and investment has been rather to retain the accumulated property than to gain more. Not surprisingly, two out of three respondents say they would more readily accept a low return to preserve the value of the capital invested. These security-oriented savers tend to have savings and investments evenly in different kinds of outlets. Figure c. Arguments relating to investment Do you agree or disagree with the following arguments relating to investment? % of respondents (n=, in 0) Am prepared to lose part of the capital invested to make a good profit Am prepared to accept a low return to preserve the value of the capital invested 8 0 % 0 % 0 % 0 % 80 % 0 % Agree Disagree Cannot say

22 . Borrowing. Present forms of credit Every second respondent had loans outstanding at the time of the survey. The figure has not changed much in the past eight years. Compared to the whole population, this means that nearly million Finns have loans outstanding. Most often loans are held by families with children: on average, % of these families have some kind of loans outstanding. Broken down according to age, the largest borrower numbers are among those aged years. There are also more loans outstanding especially among those with a yearly income of more than 0,000 and those in a professional or managerial position. Of the aforementioned groups, over 0% hold loans. Home loans are held by 8% of the respondents, which translates into roughly. million mortgage holders in Finland. The number has decreased by two percentage points from last spring and is now at the same level as in spring 00. As home loans are usually raised when people move house and start a family, mortgage is a frequent form of credit among people older than. The number of home loan borrowers is largest in the age group years; of the respondents in this category, % had a home loan. The number has increased by two percentage points from spring 00. On the other hand, the number of home loan borrowers has decreased from last year, especially among people aged 0 years, and to some extent also among people older than years. There has also been some decrease in the Helsinki metropolitan area as well as in the municipalities. Of the respondents, 8% reported they had used their home loan for purchasing a house or apartment, and % for renovating their current house or apartment. Compared to the situation of spring 00, the number of those who use their loan for home renovation has increased by three percentage points, while the number of home buyers has decreased by four percentage points. Home renovation is more frequent in the older age groups, and of respondents aged 0 or older, more than two thirds have taken a home loan for renovating their current house or apartment. Of those who took a loan to renovate their home, nearly two thirds used it to renovate, and one third used it to pay their share of condominium renovation. The proportions were the same last year. 0

23 Figure a. Credit situation Do you hold a loan or credit at the moment? 0 0 % of respondents (n=, in 0) Loan Home loan Consumer credit Student loan Figure b. Purpose of the home loan Is your home loan taken for purchasing a house or apartment, or for renovating your current home? % of respondents with a home loan (n= in 0) Purchasing 8 Renovating Cannot say

24 Figure c. Use of the home loan taken for renovation purposes Is your renovation loan taken for condominium renovation or home renovation? % of respondents with home loan taken for renovation purposes (n= in 0) Condominium renovation Home renovation Cannot say Consumer credit is held by 0% of the respondents, which translates to. million consumer credit holders in the whole country. A year ago their proportion was 8%. What is typical of consumer credits is that the age of the borrower varies more than the age of home loan borrowers. Borrower numbers were largest in age group of years, out of which % had some consumer credit. Respondents of years and younger, and on the other hand 0 years or older, have less consumer credits than average, and the number of consumer credits in these groups has also significantly dropped from 00. The most common form of consumer credit is secured consumer loan granted by bank. The proportion of these kinds of loans has stayed around the same level as last year, and is now %. A proportion of % says they have a consumer loan granted by a bank, and an account with an overdraft facility is held by four percent of Finns. Slightly more than two percent (.%) say they have taken fast cash loans during the last months. The proportion is close to last year s level, which was.%. Young people of 0 8 years are still the most active age group in this type of borrowing, with nearly % saying they have taken a fast cash loan in the last months. Fast cash loans appear to be popular among those who plan their spending for six month periods at most (%) but especially among those who exceed their income and have to resort to borrowing to cover their expenses. In the latter group one out of six respondents say they have taken a fast cash loan in the last months. Although there has been much discussion over the ease of fast cash loans and the accumulation of several consumer credits on one individual, it nonetheless appears to be most typical to only hold one consumer credit at a time. A proportion of % of this survey s respondents with consumer credit only had one. Nearly one out of three consumer credit holders hold two, % hold three, and approximately four percent hold four or more separate consumer credits. People in the age group years hold three or more consumer credits more frequently than average.

25 Figure d. Fast cash loans in the last months Have you borrowed fast cash in the past months, i.e. small cash loan raised for a short period by e.g. text message? % of respondents who have borrowed fast cash in the past months (n=, in 0) All Under 0 (n=8) 0-8 (n=0) - (n=) 0- (n=8) Over 0 (n=) age of respondents, years Student loans are held by the same amount of people as last year, % of the population. The proportion of student loan holders is highest in the age group 0 8 years, of which about one out of five has a student loan. Out of all students, a student loan is held by %, an increase of three percentage points from last year. Overall, borrowing can be considered to be on relatively secure grounds, as more than half (%) of borrowers also have savings or investments. The number has stayed on last year s level and has been increasing slightly over the years. Borrowers are also in a higher income bracket on average than others. Many mortgage or consumer credit holders are also fund savers or equity savers or hold savings in other vehicles at the same time. There are on average more people with savings in mutual funds or private pension insurance among home loan holders than others. In this case the savings act as a buffer in case of increased need of money in the future. Although the majority of borrowers have simultaneous savings, small savings and large liabilities may naturally cause risks for individual households.

26 Figure e. Savers, investors and borrowers broken down by age Do you hold savings or investments at the moment?" "Do you hold a loan or credit at the moment? % of respondents (n=, in 0) All age of respondents, years Savings and investments Loans Figure f. Borrowers broken down by age Do you hold a loan or credit at the moment? % of respondents (n=, in 0) All age of respondents, years Home loan Consumer credit

27 . Borrowing plans Borrowing intentions have increased from last year. The interest level has stayed low, which influences the willingness to borrow. A total of % of the respondents say they are planning to borrow money in the next months. A year ago % had borrowing plans. However, the number has yet to reach the level of 00 00, when % had intentions to borrow money. The number of respondents planning to borrow money was largest among people aged between 0 and 8 years, one out of four of which had intentions to raise some type of loan or credit in the next months. The proportion has returned to the level of 008 from last spring s 0%. The figure for those residing in the Helsinki metropolitan area is also above average. Six percent of Finns have intentions to raise a home loan. This number has remained relatively unchanged, fluctuating between % since 00. Those aged between 0 8 years have more borrowing plans than other respondents: the rate for potential borrowers was % in this age group. The number is only slightly higher than last year, when it was %. Home loan intentions were also more frequent among families with children and residents of the Helsinki metropolitan area. Currently 8% of those living in the Helsinki metropolitan area plan to raise a home loan, when last spring the number was %. The figure for families with children below school age is %, also higher than last year by one percentage point. Of those who planned to take a home loan, 8% are planning to purchase a house or apartment, and % plan to spend it on renovating their current home. Renovation loans have become slightly more popular: a year ago the proportion of those planning to use their home loan for renovation was nine percent. A total of % of those with renovation loan intentions plan to use it to pay their share of condominium renovation, and % plan to renovate their own home. There is some overlap, as some respondents said they plan to do both. Of the respondents, four percent say they are going to take a consumer loan from a bank. The proportion of student loans out of all borrowing intentions has slightly increased to %. More students are planning to raise a student loan than before their number has doubled from % to % in the course of a year.

28 Figure 8a. Borrowing plans broken down by type of credit Do you plan to take a new loan or credit during the next months? Yes Which of the following credits are you going to take? Home loan Consumer credit from a bank Other consumer credit*) Student loan % of respondents (n=, in 0) *) Other consumer credit In 0: bank account with credit facility, a store s card credit, other card credit or fast cash loan. Before 0: bank account with credit facility, a store s loyal customer card credit, other card credit (term of payment over months), hire purchase credit or fast cash loan. Figure 8b. Planned use of home loan For which purpose do you plan to take a home loan? % of respondents who plan to take a home loan (n= in 0) Home purchase 8 8 Home renovation Cannot say

29 . Shopping around for interest rate on existing home loan The number of people shopping around for the best interest rate on existing home loans has fallen slightly in the course of the past year. One tenth of current mortgage holders has shopped around for the best rate on their home loans in the past months, while a year ago their amount was %. The number of those who shopped for the best rate to years ago has however returned to its previous level of % from the 8% of 00. Two years or more since shopping for the best rate on their home loan had passed with % of the respondents. Like in the past two years, nearly two out of three mortgage holders have not shopped for interest rate during the whole loan period. Holders of large home loans ask several banks for quotes more frequently than others. Out of those who have a home loan of 0,000 or more, one quarter have shopped around for the best rate.. Intentions to ask for home loan quotes Respondents with intentions to take a home loan were asked whether they were going to ask only their principal bankers for a quote or whether they would contact other banks for the purpose. The number of respondents who only plan to approach their principal bank is %. In 008 the proportion was at its lowest, at %, and it was popular to ask two or more banks for a loan. Now the number of those who would only approach their principal bank has grown slightly and is close to the level of spring 00. The popularity of asking two or more banks for quotes dropped in 00, and although it is still behind the level of 008 there has been some increase. At the moment it is clearly more popular to ask for quotes from two banks rather than from three or more. The total proportion of those who ask for quotes from two or more banks is %. Figure. Shopping around for interest rate on home loan How many banks do you intend to ask for a quote? One, my principal bank One, other than my principal bank Two banks Three or more banks Not sure No intentions to ask % of respondents who plan to take a home loan (n= in 0)

30 . Home loan periods Those who had drawn their home loan less than two years ago were asked how long the original repayment period had been. These borrowers represent % of all home loan borrowers covered by the survey. The report contains comparison data from the surveys made in 00, 008, 00 and 8. The average repayment periods of home loans have increased substantially since 8. While in 8 the average repayment period was years, it had lengthened to years by 008 and 00. The lengthening of repayment periods finally levelled off last year, and in 0 the development has turned downwards. The average repayment period of home loans taken less than two years ago is currently years. The most typical repayment period for home loans taken less than two years ago is currently 0 years. In last spring s report the most typical repayment period was 0 to years, and in spring 008 the typical period was years. In home loans, average repayment periods are longer in larger loans and in loans in which a larger proportion of the purchase is funded with borrowed money. Loans taken by first-time home buyers are on average longer than loans taken to finance later home purchases. The average repayment period of first-time buyers is the same years as last year. The average repayment period of later home purchases has shortened by one year from last spring and is now years. The difference between repayment periods in the Helsinki metropolitan area and the rest of the country has shrunk a little. In the Helsinki metropolitan area, the average loan period is now. years, while elsewhere in Finland the average is. years. Figure a. Home loan period broken down by loan size, 0 What was the original repayment period of your home loan?" Home loans taken during the last two years (n= in 0) 0 Average repayment period, years 0 0 All Less than 0,000 0,000-0,000 0,00-0,000 0,00-0,000 0,00-0,000 Over 0,000 Loan, 8

31 Figure b. Home loan repayment period in spring 0 What was the original repayment period of your home loan? Average repayment period years % of home loans taken during the last two years (n= in 0) - years - years years - years years - years 0 years - years years - years 0 years - years 0 years 0 years Figure c. Home loan repayment period in spring 00 What was the original repayment period of your home loan? Average repayment period years - years - years years - years years - years 0 years - years years - years 0 years 0 years % of home loans taken during the last two years (n= in 00)

32 Figure d. Home loan repayment period in spring 008 What was the original repayment period of your home loan? Average repayment period years - years - years years - years years - years 0 years - years years - years 0 years 0 years % of home loans taken during the last two years (n= in 008) Figure e. Home loan repayment period in spring 00 (8 years) What was the original repayment period of your home loan? Average repayment period 8 years % of home loans taken during the last two years (n=8 in 00) - years - years years - years years - years 0 years - years years 0 years

33 Figure f. Home loan repayment period in 8 What was the original repayment period of your home loan? Average repayment period years % of home loans taken during the last two years (n= in 8) - years - years years - years 8 years - years 0 years Home loan amounts The survey reveals that the average size of home loans rose throughout the last decade, but their growth has slowed down during the last couple of years. At the time of the survey, the average size of home loans had increased by seven percent in the course of a year, which is the same percentage as from 008 to 00. The growth rate of home loans was still noticeably higher in 00, when there was an increase of % from the previous year. This year s change can to some extent be explained with the current low interest level and the effect it has on the size of instalments. Many have presumably also taken advantage of the situation and paid off small remaining loans. These yearly growth rates seem parallel with the loan portfolio statistics. The average amount of home loans outstanding at the moment is 8,800. In the Helsinki metropolitan area the average loan size is larger than elsewhere, 8,000. The average amount shows signs of levelling off also in the metropolitan area, as a year ago the amount was 0,000 but in 008 it was,00. The largest home loans were owed by families with children younger than school age, and households with gross annual income of over 80,000. In families with young children, home loans average over,000 at the time of the survey. The average loan amount has increased in this group from last spring, when it was,00, but the loan amounts of other groups have stayed more or less at the same level as earlier. In high-income households, home loans average,000, when in spring 00 they averaged,800. Broken down by the age of borrower, home loans are the largest in the age group of years, but the average size of home loans begins to decrease after the age of 0 years.

34 Figure a. Average home loan amount How much home loan do you have at the moment? Respondents who currently have a home loan (n= in 0) 0,000 80,000,00,00,00 8,800 0,000 0,000 0,00,800,000,00,800 8,00 0,000 0, Autumn The proportion of borrowers with sizeable home loans has continued to increase in the past twelve months. Where % of the borrowers now owe more than 0,000 in home loans, the rate was % a year ago and 8% two years ago. Borrowers with home loans of more than 0,000 represent % of the total, while a year ago the number was about % and two years ago less than %. Table. Home loan amounts (% of respondents with home loans) How much home loan do you have at the moment? 00 n= % 00 n=8 % 00 n= % 00 n= % 008 n=8 % 00 n= % 0 n= % Less than, ,00 0, ,00 0, ,00 0, ,00 80, ,00 0, ,00 0, Over 0, Average amount,000,00 8,00,00,00,00 8,800