A group of specialists have published their recommendations for how to reduce indexed loans, but not everyone on the committee was in agreement with their plan.
RÚV reports that the group has outlined four main points:
1. Fixed rate indexed loans for longer than 25 years will be abolished.
2. The minimum time for indexed consumer loans will be raised for 5 years to 10.
3. Indexed real estate loans will be limited in such a way that money from them may only be used for the specific property for which the loan was sought. Related to this point, they recommended placing a cap on the indexed mortgage LTV (loan-to-value) ratio.
4. Tax incentives should be used to encourage people to take out non-indexed loans instead of indexed ones.
Ingibjörg Ingvadóttir, the chairperson of the group, told Vísir that these changes could go into effect as early as 1 January 2015. In 2016, another re-assessment will be done on the effects of the changes, and new measures might then be taken.
Vilhjálmur Birgisson, another member of the group (and also the chairperson of the Akranes Trade Union), submitted a dissenting opinion on the matter, saying that the plan is not in keeping with the government’s pledge to completely abolish indexed loans. He recommended that indexed consumer loans be totally abolished on 1 June 2014.
In fact, Prime Minister Sigmundur Davíð Gunnlaugsson wrote on his personal blog last March, in a post entitled “Abolishment And Correction: This Is Simple”, that “the abolishment [of indexed loans] must be initiated”.
For more on Icelandic Index Linked Mortgages, read Larissa Kyzer’s Shadow Boxing With The Banks and Jacky Mallett’s Robbery By Math.