Rules on maximum LTV and DSTI ratios
Two new sets of Central Bank rules were published in the Law and Ministerial Gazette [Stjórnartíðindi] today: the Rules on Maximum Loan-to-Value Ratios for Mortgage Loans to Consumers, no. 702/2022, and the Rules on Maximum Debt Service-to-Income Ratios for Mortgage Loans to Consumers, no. 701/2022. The Rules were approved at a meeting of the Central Bank Financial Stability Committee on 14 June 2022 and take effect tomorrow, 16 June 2022. At the same time, the previous Rules on Maximum Loan-to-Value Ratios for Mortgage Loans to Consumers, no. 778/2021, and the previous Rules on Maximum Debt Service-to-Income Ratios for Mortgage Loans to Consumers, no. 1268/2021, shall cease to apply.
With the new Rules on Maximum Loan-to-Value Ratios for Consumer Mortgages, the maximum loan-to-value ratio for first-time buyers has been lowered from 90% to 85% of the market value of the underlying property. The new Rules on Maximum Debt Service-to-Income Ratios for Mortgage Loans to Consumers introduce a minimum interest rate to be used to calculate the maximum ratio of debt service to income. Henceforth, the calculation shall be based on either the contractual interest rate or the minimum rate provided for in the Rules (5.5% for non-indexed loans and 3% for indexed loans), whichever is higher. A change has also been made to the maximum loan maturity used to calculate the debt service-to-income ratio for indexed loans.
It should be noted that the new Rules apply to mortgage loan agreements made after the Rules take effect.
Press release no. 14/2022
15 June 2022
The rules will be translated into English, but the Icelandic version is here:
Reglur um hámark greiðslubyrðar fasteignalána í hlutfalli við tekjur neytenda, nr. 701/2022
Reglur um hámark veðsetningarhlutfalls fasteignalána til neytenda, nr. 702/2022