realkreditt

Realkreditt refers to a form of long-term, secured lending used to finance real estate purchases, primarily housing, in Nordic countries and other European markets. It is typically provided by specialized mortgage credit institutions (realkreditinstitusjoner) and funded by issuing covered bonds to investors. The loans are secured by mortgages on real property and are designed to be repaid over long horizons, often 15 to 40 years.

Borrowers receive loans with fixed or long-term interest rates; LTV ratios are carefully controlled by regulation and internal risk limits to manage credit risk. The cover pool, consisting of the mortgages backing the bonds, is kept segregated from the lender's other assets, which provides security for bondholders.

In operation, the lender originates mortgages, makes them part of a cover pool, and issues mortgage bonds to raise funds. The pool remains on balance sheet in the sense that the originator remains responsible for servicing the loans, while investors hold the covered bonds that are secured by the pool. This structure aims to combine long-term funding with stable, secured lending for property.

Regulation: Realkreditt is regulated by national financial authorities, with additional rules under the EU/EEA framework in many jurisdictions. Key aspects include capital requirements, risk-weights, and rules governing the covered bond regime, as well as consumer protection for loan terms and disclosures.

History: The realkreditt model originated in the Nordic region in the 19th and 20th centuries to promote long-term housing finance and financial stability. It evolved with the growth of the covered bond market, standardized lending practices, and tighter regulatory oversight.