Arion Bank has paused all new indexed mortgage lending in Iceland. This follows a Supreme Court decision against Íslandsbanki that found some non-indexed loan terms illegal. The bank says its variable-rate mortgage terms differ from those ruled unlawful. But courts will soon review an Arion case involving variable indexed rates.
Arion Bank made this announcement on Tuesday. Bank executives decided to temporarily stop offering both fixed and variable-rate indexed mortgages. They are examining whether temporary solutions can be offered during this legal uncertainty. The bank confirms non-indexed mortgages remain available.
Haraldur Guðni Eiðsson, Arion's communications director, said staff are working to resolve the situation. He described the circumstances as somewhat complicated. The bank encourages customers to contact them directly to discuss available options.
This legal uncertainty affects Iceland's housing market at a sensitive time. The Supreme Court's upcoming decision could reshape mortgage lending standards across Icelandic banks.
What are indexed mortgages in Iceland? These loans adjust with inflation, protecting lenders but increasing borrower costs during high inflation periods. Many Icelandic homeowners use them despite the risks.