Icelandic pension funds reach state mortgage support agreement with govt

The Icelandic Minister of Finance and Economic Affairs has signed an agreement with 12 pension funds regarding the support of the state fund for housing loans to individuals in Grindavík.

The agreement aims to enable the Treasury to support property owners in Grindavík who have fallen outside the scope of other mortgage lenders regarding the cancellation of interest and price improvements on their loans.

Under the agreement, the Treasury will pay the accrued interest and price compensation from the mutual fund loans of individuals for their property in Grindavík for six months.

The support is limited to accrued interest and price improvements on mutual fund loans up to ISK 50m for the maturity date in December 2023 through May 2024.

To be eligible, the borrower’s property must be for their own use.

The support of the Treasury covers mortgage holders whether they have requested payment protection from the pension fund or not.

At the point of settlement, the borrower must be as financially well off as if the accrued price compensation and interest on their loan had been paid over the period of the agreement.

However, Treasury support does not cover the repayment of the principal of mutual fund loans.

It was estimated that the agreement will cover between 150 and 200 member loans and the support of the Treasury for the remedy will cost between ISK 120m and ISK 150m.

The agreement is subject to authorisation in the Budget and mortgage holders must contact the pension funds about the remedies.

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