Moody’s says Iceland Housing Finance Fund under increasing pressure

Moody’s reported on Monday that Iceland’s Housing Finance Fund (HFF) is experiencing growing pressure due to restrictions.

A statement released by the investor service firm said, “Commercial banks’ non-inflation indexed loan issuance is credit negative for HFF, constraining its market share and franchise value. It is credit positive for the commercial banks, which are strengthening their balance sheets and franchises through this collateralised household lending,” Bloomberg reports.

Officials also said that the government backed lender posted a 40 percent decrease over the first six months of 2012 when compared to the same period one year prior. Experts from Moody’s said in a credit report that the fund’s lending dropped during the timeframe because the Baa3-rated agency is only able to issue inflation-linked loans and funding.

However, HHF chief executive Sigurdur Erlingsson said in an interview with Bloomberg that his organisation was getting ready to offer non inflation-linked loans in the latter half of the year. He said that “a few months” of decline did not have a significant impact and that the fund still has a 60 percent share of the mortgage market in Iceland. He added that he HFF will “seek its past balance” once it has begun offering non inflation-linked products.