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Loans to be Corrected by ISK 1.35 Million on Average

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Loans to be Corrected by ISK 1.35 Million on Average

Reykjavík with Hallgrímskirkja in the background

Reykjavík. Photo: Páll Stefánsson.

The average write-off under the government’s debt cancelation plan, which aims to correct indexed mortgages for the effects of inflation in 2008 and 2009, will be ISK 1.35 million (USD 11,000, EUR 8,800) per household, as announced in a press conference this afternoon.

The average correction for a couple is ISK 1.5 million and ISK 1.1 million for an individual, or ISK 1.35 million on average overall. As an example, monthly repayments on a ISK 10 million loan will be lowered by ISK 8,705, ruv.is reports.

The Icelandic government intends on implementing its debt relief plan sooner than initially planned in order to save costs on interest rates.

Around 90,000 households have had their applications for debt correction accepted. An additional 15,000 cases are still being processed.

ISK 80 billion (USD 642 million, EUR 520 million) of the ISK 100 billion contributed by the state will come from public funds.

Seventy-five percent of debt corrections will go to individuals with an annual salary of less than ISK 7 million and couples with less than ISK 16 million. The majority of people who have had their applications accepted, or 68 percent, are younger than 50 years old.

The cancelation of household debt was Prime Minister Sigmundur Davíð Gunnlaugsson’s Progressive Party’s big election promise. The plan has however been harshly criticized in part because the funds were initially supposed to come from foreign hedge funds rather than public funds.

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