Arion Bank temporarily suspends new indexed mortgages
The Supreme Court recently pronounced judgment in a case brought against Íslandsbanki, where the terms of a non-indexed loan, specifically those allowing for interest rate changes, were partially deemed unlawful. According to the judgment, it is permissible to adjust interest rates on comparable loans in line with changes to the Central Bank of Iceland’s policy rate.
Uncertainty regarding the legality of terms for indexed loans
The terms of Arion Bank’s variable-rate mortgage loans differ from those subject to the Supreme Court judgment. A case concerning an Arion Bank loan with variable indexed interest rates is due to be heard by the Supreme Court, although the Court of Appeal ruled in the Bank’s favour last February. Furthermore, the interest rate adjustment terms for Arion Bank’s indexed loans do not, by nature, refer to the Central Bank’s policy rate. Therefore, uncertainty remains over the legality of indexed loan terms that provide for changes in interest rates.
Therefore, Arion Bank is, for the time being, not offering indexed loans, regardless of whether they bear variable or fixed interest rates. The Bank is currently assessing whether a temporary solution can be offered until the legal uncertainty surrounding the loan terms is resolved.
Non-indexed loans still available – learn about fixed monthly payments
Non-indexed mortgage loans will continue to be available. In addition, Arion Bank offers customers who prefer non-indexed loans but wish to reduce their monthly repayments the option of having fixed monthly payments. By opting for fixed payments, a fixed amount is paid for twelve months, which is lower than the monthly payment under the terms of the loan. The difference is added to the loan principal, resulting in an increase in the loan amount. Customers can choose to base the fixed monthly payment on interest rates that are 1%, 2%, 3%, or 4% lower than the current rate on the loan.
Contact us
We encourage anyone considering buying a home to contact us by phone on 444 7000, via e-mail at ibudalan@arionbanki.is, or via webchat on our website to discuss the available options.