The Central Bank of Iceland published the minutes of its Financial Stability Committee meeting of 31 October 2025, which approved amendments to borrower-based mortgage measures by expanding lenders’ exemptions under debt service-to-income limits and lifting the maximum loan-to-value threshold for first-time buyers. The Committee reviewed the Supreme Court judgment of 14 October 2025 in Case no. 55/2024 and subsequent developments in the mortgage market, including loan terms, households’ financial conditions and mortgage loan supply, and discussed further Supreme Court decisions expected in similar cases. Members compared current housing market conditions with those in June 2022, when borrower-based measures were tightened, and considered the limited recent use of existing debt service-to-income (DSTI) exemption authorisations and shifts in loan-to-value (LTV) distributions for first-time buyers. The approved changes increase the quarterly DSTI exemption from 5% to 10% of lending and shift the exemption calculation to the previous quarter’s total loan amount, while raising the first-time buyer LTV cap from 85% to 90% and keeping the cap for other borrowers unchanged. The Bank also indicated it would soon publish constant-maturity rate information to support more standardised and transparent comparison and pricing of Icelandic financial products.
Central Bank of Iceland 2025-12-01
Central Bank of Iceland raises DSTI exemption allowance to 10% and increases first-time buyer LTV cap to 90%
The Central Bank of Iceland's Financial Stability Committee approved amendments to borrower-based mortgage measures, increasing the debt service-to-income exemption from 5% to 10% and raising the loan-to-value cap for first-time buyers from 85% to 90%. The Bank will also publish constant-maturity rate information to enhance transparency in Icelandic financial product pricing.