The Central Bank of Iceland’s Financial Stability Committee approved amendments to its maximum debt service-to-income (DSTI) rules for consumer mortgage loans to ensure that all housing-acquisition payment obligations are reflected in DSTI calculations, including those arising from joint purchase arrangements. It also adopted new rules for oversight of systemically important financial market infrastructure and decided to leave key capital buffers unchanged. The DSTI changes respond to recently announced plans by funds to invest in residential property together with homebuyers, with public declarations indicating that about one-third of new homes in greater Reykjavík would be offered under such arrangements. The Committee assessed the model as riskier than conventional home purchases and noted that widespread use could elevate systemic risk and undermine the objectives of borrower-based measures, so debt service calculations must now take into account all payments made by individuals for the acquisition of housing, including payments for the use of the property linked to the acquisition even if deferred. In its annual review, the Committee confirmed Arion Bank, Íslandsbanki, and Landsbankinn as systemically important and kept the buffer for systemically important institutions (O-SII buffer) at 3%, while holding the countercyclical buffer (CCyB) unchanged at 2.5%; it also highlighted that lenders’ exemption authorisation under the DSTI rules was increased in October 2025 from 5% to 10% of issued mortgage loans. The new financial infrastructure rules set criteria for identifying systemically important infrastructure components and how the Central Bank will oversee them, alongside rules establishing a financial infrastructure incident centre to support rapid information-sharing and a harmonised response to cyber and operational incidents. Minutes of the Committee meeting of 28 November and 1-2 December 2025 are scheduled for publication on 7 January 2026.
Central Bank of Iceland 2025-12-03
Central Bank of Iceland amends mortgage debt service-to-income rules, adopts financial infrastructure oversight regime, and keeps capital buffers unchanged
The Central Bank of Iceland’s Financial Stability Committee tightened maximum debt service-to-income rules for consumer mortgages so that all housing-acquisition payment obligations, including joint purchase arrangements, are captured in DSTI calculations. It noted that lenders’ exemption authorisation under the DSTI rules was increased in October 2025 from 5% to 10% of issued mortgage loans. The Committee confirmed Arion Bank, Íslandsbanki, and Landsbankinn as systemically important, kept the other systemically important institutions buffer at 3% and the countercyclical buffer at 2.5%, adopted new rules for identifying and overseeing systemically important financial market infrastructure, and established a financial infrastructure incident centre for cyber and operational incidents.