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 credit supply and demand; changes in their rules on lending; interest rates and interest premia; and the factors that, in their opinion, had made a decisive impact on these changes in the previous three months. The banks are also asked about their expectations for the coming six months. The results of the most recent survey, conducted during the period 2-14 January 2026, are based on the average of the commercial banks’ responses.
Highlights
According to the responses, the commercial banks’ supply of mortgage loans to households contracted in the three months prior to the survey, probably because of the Supreme Court’s October 2025 judgment in the so-called interest rate case. On the other hand, the banks assume that the supply of household mortgages will increase marginally in the six months ahead, but that the supply of other household loans will hold unchanged over the same period.[1] The banks discerned a slight downturn in household demand for mortgages in the previous three months, but they expect demand for mortgages to remain unchanged in the coming six months. They noted an increase in demand for motor vehicle loans in the previous three months but expect demand to contract marginally in the next six months.
According to the responses, the banks’ rules for lending to households were unchanged in the three months prior to the survey and are expected to remain unchanged in the next six months. The banks also expect competition with other lenders for household loans to increase marginally in the coming six months.
Interest rates and interest premia on inflation-indexed loans to households had risen slightly in the previous three months, according to the banks’ responses. Changes in the regulatory framework were the main cause of interest rate rises, while lower funding costs and reductions in the Central Bank’s key interest rate had a slight offsetting impact. The banks specified that the Supreme Court judgment in the interest rate case had reduced flexibility in pricing, particularly for inflation-indexed loans. They expect interest rates and interest premia on indexed loans to households to remain unchanged in the coming six months.
Interest rates on non-indexed loans to households had declined in the previous three months, according to the survey, although interest premia on these loans had risen marginally. The reduction in the Central Bank’s key rate had been the main driver, although the banks’ funding costs had been a factor as well. Changes in the regulatory framework had made little upward impact. The banks assume that non-indexed mortgage rates will keep falling in the coming six months, in tandem with expected reductions in the key rate and changes in the regulatory framework, but they assume that interest premia will be unchanged over the period. It is worth noting that the European Union’s third Capital Requirements Regulation (CRR3) was incorporated into Icelandic law at year-end 2025. CRR3 includes changes in the banks’ lending-related reserve requirements, thereby affecting how loans are priced. According to the banks’ responses, there can be both upward and downward effects.
The banks reported that the supply of króna-denominated corporate loans had been unchanged in the preceding three months, while the supply of foreign-denominated loans to large companies had grown over the same period. Developments are expected to be broadly similar in the next six months. According to the banks’ responses, companies’ demand for króna-denominated credit financing had remained stable in the previous three months, while larger firms’ demand for foreign-denominated financing had increased marginally. The banks assume that both large and small companies’ demand for króna-denominated loans will contract slightly in the six months ahead but that large firms’ demand for foreign-denominated loans will continue to increase marginally.
The survey indicates that the banks had not changed their rules on corporate lending over the previous three months and did not anticipate any changes in the next six months. Furthermore, the banks expect competition for corporate lending to remain unchanged over the coming six months.
According to the banks’ responses, interest rates on inflation-indexed loans to both small and large companies had declined slightly in the preceding three months, concurrent with the reduction in the Central Bank’s key interest rate and an increase in competition, whereas interest premia had held unchanged. Interest rates on non-indexed loans to companies had declined as well over the three-month period, primarily because of lower Central Bank rates but also because the banks’ funding costs had fallen. Interest premia had remained unchanged. Rates on foreign-denominated loans to large companies had declined marginally at the same time, as had interest premia on loans to both large and small companies.
The banks do not assume that interest rates and interest premia on inflation-indexed loans to companies will change in the next six months, but they do expect rates on non-indexed loans to companies to ease in tandem with expected reductions in the key interest rate; however, the regulatory framework will have a slight offsetting impact, pushing rates marginally upwards. Interest premia are expected to remain unchanged. The banks assume that rates on foreign-denominated corporate loans will remain unchanged over the same period, but that interest premia on those loans will ease slightly.
[1] In the survey, loans to households are divided into three categories: residential mortgages, motor vehicle loans, and other loans. Loans to businesses are classified as either long-term or short-term loans. Furthermore, survey participants are asked about foreign-denominated lending to both households and businesses.