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.
Highlights
The survey results indicate that the commercial banks’ supply of loans to households has been unchanged in the past three months. The banks expect 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 increase in household demand for mortgages and car loans in the past three months, and they expect a minor increase in demand for mortgages in the coming six months.
According to the banks’ responses, their rules for lending to households have been unchanged in the past three months and are expected to remain unchanged in the next six months. They also expect bank-to-bank competition for household lending to increase marginally in the coming six months.
Interest rates on indexed and non-indexed loans to households have been unchanged in the past three months, while interest premia on non-indexed loans have risen slightly, according to the banks’ responses. Interest rates and interest premia on non-indexed loans are expected to start falling again in the six months ahead, in tandem with expectations of policy rate cuts, lower funding costs, and amendments to the regulatory framework. It is worth noting that the European Union’s third Capital Requirements Regulation (CRR3) is set for incorporation into Icelandic law before year-end 2025. CRR3 includes changes in the banks’ lending-related reserve requirements, which affect how loans are priced.
The banks report that the supply of króna-denominated corporate loans has been unchanged in the past three months but that the supply of foreign-denominated corporate loans has grown marginally over the same period. Developments are expected to be broadly similar in the next six months. According to the banks’ responses, demand for credit has been unchanged among smaller companies in the past three months but has increased slightly among large firms. The banks assume that demand for króna-denominated loans will shrink marginally in the next six months for small and large companies alike.
The survey indicates that the banks’ rules on corporate lending were unchanged over the past three months and that no changes are expected in the next six months. The banks expect stronger competition for corporate loans, both from other banks and from non-bank lenders, in the six months ahead. Furthermore, in connection with loans to large firms, they expect stiffer competition from market-based financing.
Interest rates and interest premia on corporate loans have been broadly unchanged in the past three months, according to the banks’ responses. Interest rates on non-indexed loans to large companies are expected to ease slightly in the next six months, based on the assumption that the Central Bank will lower its key interest rate during the period. At the same time, the banks anticipate that interest premia on both indexed loans and foreign-denominated loans to companies will increase slightly, based on the expectation of changes to the regulatory framework.
* 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.