Iceland homeowners get welcome boost

Iceland homeowners get welcome boost

Iceland says it has launched a debt cancellation initiative for mortgage holders which is likely to benefit half the households in the country.

Each debt could see as much as 26,000 euros knocked off the total due. On Sunday, the country’s tax authorities launched the website, where homeowners can file their application. Some 5,000 people registered in the opening two hours, said one of the site’s technical managers.

During the general election campaign in April last year, Prime Minister Sigmundur Davíð Gunnlaugsson’s Progressive Party as well as the Independence Party vowed to launch the debt relief party if elected. On Friday, parliament passed a bill allowing borrowers to apply for a debt cancellation, fully financed by the state.

The government estimates that the plan will help 69,000 of the 124,000 households in the North Atlantic nation. The key measure for the project is the households’ capital reduction of debt with inflation-indexed mortgages. The amount knocked off the debt will depend on what was initially borrowed, with the limit set at four million krónur. Income will not be a factor.

Icelandic banks mostly offered inflation-indexed mortgages prior to the economic crash in 2008. As a result of the collapse, the inflation rate shot up causing household debts to soar. In 2012, a worrying 36.7 per cent of households admitted to having trouble getting by, while 11.5 per cent said claimed the faced “great difficulty” making ends meet.