The Financial Stability Committee of the Central Bank of Iceland decided to amend its borrower-based mortgage lending limits for consumers, easing constraints by expanding the share of loans that can breach the debt service-to-income (DSTI) cap and raising the loan-to-value (LTV) ceiling for first-time buyers. The changes were framed as a response to uncertainty in the mortgage market following the Supreme Court’s 14 October 2025 decision in Case no. 55/2024 and lenders’ reactions to it. Under the amendments, lenders may issue mortgages above the maximum DSTI ratio up to 10% of the total amount of consumer mortgages issued in the previous quarter, up from 5%. The maximum LTV ratio for mortgages for first-time purchases increases to 90% from 85%, via revisions to Rules no. 216/2024 (DSTI) and no. 217/2024 (LTV). The revised rules will be reissued under their current titles, published on the Law and Ministerial Gazette website (Stjórnartíðindi) on 3 November 2025, and take effect one day later.
Central Bank of Iceland 2025-10-31
Central Bank of Iceland raises DSTI exemption to 10% and lifts first-time buyer LTV cap to 90%
The Financial Stability Committee of the Central Bank of Iceland amended borrower-based mortgage lending limits, increasing the share of loans that can exceed the debt service-to-income cap to 10% and raising the loan-to-value ceiling for first-time buyers to 90%. These changes, effective 4 November 2025, respond to market uncertainty following a Supreme Court decision.