The minutes of the Central Bank of Iceland's Financial Stability Committee meeting for October 31, 2025 have been published. At its meeting, the Financial Stability Committee was given a presentation on the judgment handed down by the Supreme Court on 14 October 2025 in Case no. 55/2024 and on subsequent developments in the mortgage market, including terms and conditions for loan agreements, households’ financial conditions, and the mortgage loan supply. The Committee also discussed upcoming Supreme Court decisions in similar cases centring on mortgage loan terms.They discussed developments in housing market conditions since the FSN’s September 2025 meeting and compared them to conditions in June 2022, when borrower-based measures were tightened. At the meeting the Committee also discussed the exercise of exemption authorisations as provided for in rules on DSTI ratios, as lenders had only partially utilised these authorisations in the recent term. Members also reviewed the distribution of LTV ratios for first-time buyers before and after the borrower-based measures were tightened in 2022. The Committee was informed that the Central Bank would soon publish information on constant maturity rates, which could be useful to financial market entities, analysts, and the Treasury. Such information could contribute to transparency in an impartial and standardised way, as well as enabling more effective comparison and pricing of Icelandic financial products. The Committee was of the view that significant uncertainty prevailed in the housing market following the Supreme Court judgment in Case no. 55/2024. In particular, the position of first-time buyers and lower-income buyers appeared to have worsened.
Following the discussion, the Chair of the FSN proposed three amendments to the Bank’s borrower-based measures. Two amendments would be made to the Rules on Maximum Debt Service-to-Income Ratios for Mortgage Loans to Consumers: first, the quarterly exemption granted to lenders would be increased from 5% to 10% of the total amount of loans issued, and second, the exemption ratio would be calculated based on the total amount of loans issued in the previous quarter and not in the current quarter. Furthermore, the maximum LTV ratio for first-time buyers would be increased from 85% to 90%. The maximum LTV ratio for other borrowers would remain unchanged. The proposals were approved unanimously.
See the full minutes here: