Iceland’s Prime Minister expresses concern over mortgage shifts amid high interest rates

In recent comments, Iceland’s Prime Minister Bjarni Benediktsson expressed concern over the increasing number of homeowners transitioning from non-indexed to indexed mortgage loans due to high interest rates. He described this trend as unfavorable for the housing market and the financial system in the long term, noting the loss of a healthier balance between indexed and non-indexed loans.

Benediktsson acknowledged the positive development of a decline in inflation over the past year, although he recognized that it has not decreased as quickly as hoped. He indicated that recent predictions of economic growth might need to be revised upwards, given that actual economic performance, including growth and consumer spending, has exceeded expectations.

He emphasized the necessity for economic forecasts to be based on more reliable foundations, so decisions made in monetary policy, public finance, or collective bargaining are grounded in solid data. “Many of the assumptions that have underpinned financial plans in recent years have evolved quite differently than anticipated,” he noted, underscoring the importance of improving forecast abilities for better decision-making.

As the central bank prepares to announce its interest rate decision, which has remained unchanged at 9.25% for a full year, Benediktsson remarked on the challenges the high rates pose for aspiring homeowners and the broader economic landscape. He reaffirmed the government’s commitment to addressing inflation as a significant priority for both households and businesses.