OSLO, Jan 2 (Reuters) - Norway's central bank governor warned Norwegians on Monday against taking out over-sized mortgages in a booming housing market as the country's biggest property manager OBOS predicted an eight percent price surge to new record highs in 2017.
Oeystein Olsen said the bank's main interest rate, now 0.5 percent, was exceptionally low and that borrowers should ensure they could make repayments at far higher levels.
High house prices and rising household debt have become major concerns for the Norwegian central bank. The boom has defied a halving of the price of Norway's oil exports since 2014 that has put a brake on overall economic growth.
"We never give promises but most probably the interest rate will remain low for a long time and at least through 2017," Olsen told independent TV2 in an interview.
"But when people invest, especially in houses, people should take into account that current rates are exceptionally low. The current interest rate is 0.5 percent and you should at least add three percentage points on top of that to come close to a level I would call a normal rate," he said.
Separately on Monday, Norway's biggest building association OBOS, which mainly builds apartment blocks and is owned by its 390,000 members, predicted that prices in the Oslo area would rise by 16 percent in 2017 and by eight percent in the whole country.
In December, prices for OBOS apartments in Oslo rose 2.3 percent to a record high average price of 63,525 Norwegian crowns ($7,346.05) per square meter compared to November, equal to a rise of 29.5 percent for the full year.
For the whole country, OBOS prices rose 1.6 percent to an average of 55,565 crowns per meter in December, or 24.3 percent year over year. In total 8,466 OBOS second-hand houses apartments sold in 2016. ($1 = 8.6475 Norwegian crowns) (Reporting By Ole Petter Skonnord; Editing by Alister Doyle and Gareth Jones)