Housing wealth and indebtedness - growing differences between generations?

Workshop 2. Session B. Abstract Essential differences between generations in wealth accumulation and indebtedness can arise as a result of structural system changes. This happened in the Finnish housing finance system at the turn of the millennium. The traditional characteristics and problems of the housing mortgage system changed radically. Older generations used to pay their housing loans in 5-10 years, for the young generation the loan period for purchasing their homes can be 30 years or more, but under 20 years, on the average, though. This paper estimates the possible negative effects from this, which poses a growing risk of overindebtedness for young entrants to the housing market. We use in our analysis the data from Statistics Finland\u92s Wealth Surveys from 1998 and 2004. Very low current interest rates tempt new entrants to the housing market to take big loans. In the Risk Society, young entrants to the housing market are themselves responsible for forecasting the future. When housing is distributed through the market mechanism, the risks are passed on to the market actors and especially to young people. In a time that emphasises individuality, the individuals must also be able to calculate very complicated risks. The differences in wealth, and especially in indebtedness, between generations are growing. New home owners are highly mortgaged and pay a high share of their income for housing, and will continue to do so for decades with the longer loan periods. Rising interest rates are a risk not yet fully realised in Finland