Ombudsman urges government action on rising property owner financial issues in Iceland

Since 2017, there has been a noticeable decline in the number of property owners seeking assistance from the Debtors’ Ombudsman due to financial issues. The Ombudsman criticizes the government for not extending measures allowing the allocation of private savings toward home loans. This year, property owners accounted for 15% of those approaching the Ombudsman, a significant increase from previous years.

Currently, around 61 applications are received per month, an uptick from 58 last year, with most applicants aged between 30 and 39. Although changes from year to year appear minor, the increase in property owners seeking financial guidance marks a trend not seen in a long time. The Ombudsman notes that while the largest group continues to be renters, there is a growing concern among homeowners.

The current budget does not include provisions to extend the option of using private savings for home loans, except for first-time homebuyers. In 2023, approximately 37,000 individuals have taken advantage of this measure, totaling nearly 18 billion ISK, with around 11.5 billion ISK allocated to home loans. The Ombudsman urged the government to reconsider the decision not to extend this facility, emphasizing the necessity of such support in today’s economic climate.

Compounding the financial challenges, Arion Bank announced an increase in interest rates for indexed home loans, raising variable rates by 0.60 percentage points and fixed rates by 0.50 percentage points—resulting in significant increases. The Ombudsman expresses concern over the rising rate of defaults in society, stressing that these trends could herald further difficulties ahead.