Buyers accumulate debt amid hopes for interest rate cuts in Iceland

Economic Affairs Buyers Accumulate Debt Amid Hopes for Interest Rate Cuts

The chairperson of the Real Estate Agents Association has noted that high benchmark interest rates continue to impact homeowners significantly. Many buyers are incurring more debt than before, with expectations that interest rates will soon decrease.

For several months, government efforts to address housing shortages have fallen short, resulting in a persistent demand for apartments that exceeds supply. Despite the high interest rates, there remains considerable demand for properties in the market. The chairperson indicated that buyers are increasing their borrowing and are optimistic about a potential drop in interest rates, which have remained at 9.25% for a year.

“There is pressure on demand in these tough conditions,” Monika Hjálmtýsdóttir stated. “You could say the market is in a kind of equilibrium, masked by the fact that if conditions were better, the pressure would be even greater.”

She pointed out that many current buyers are those moving residences, while first-time buyers are waiting for more favorable terms. Hjálmtýsdóttir mentioned that an increasing number of buyers are opting for indexed loans and are hoping that rates will soon decline, possibly leading to market expansion.

“With these expectations influencing the market, people are indeed taking on more debt,” she remarked. “They anticipate an improvement in conditions, a decrease in interest rates, and an uptick in property prices.”