The Financial Stability Committee (FSN) of the Central Bank of Iceland decided at an extraordinary meeting held today, 31 October 2025, to amend the Rules on Maximum Debt Service-to-Income Ratios for Mortgage Loans to Consumers, no. 216/2024, and the Rules on Maximum Loan-to-Value Ratios for Mortgage Loans to Consumers, no. 217/2024.

Uncertainty has developed in the mortgage lending market following the decision handed down by the Supreme Court on 14 October 2025 in Case no. 55/2024. Lenders are now assessing the impact of this decision and forthcoming judgments in comparable cases. They have already suspended issuance of certain types of mortgage loans due to uncertainty about loan terms and conditions. As a result, the supply of credit has been reduced, at least temporarily, particularly the supply of loans with a relatively lighter debt service burden. The loan options that have been introduced to replace the suspended loan types feature poorer interest rate terms and tighter borrowing requirements. The position of first-time buyers and lower-income buyers appears to have worsened especially.

The minutes for the meet­ing of the Fin­an­cial Sta­bil­ity Com­mit­tee from 22 and 23 September 2025 have been pub­lished. At its meeting of the Committee was given a presentation on developments and prospects for the economy and for financial stability.

The Central Bank conducts quarterly lending surveys among the four commercial banks. In the surveys, the banks are asked for their assessment of developments in supply and demand for credit; the factors that, in their opinion, had a decisive impact on supply in the previous three months; and their expectations for the coming six months. The results of the most recent survey, conducted during the period 1-14 October 2025, before the Supreme Court ruling on the terms of non-indexed mortgages with variable interest rates. The results are based on the average of the commercial banks’ responses.