Key Financial Indicators and Balance Sheet Analysis Q1 2023
Residential mortgages
Low default rates and comfortable LTV levels,
but increased risk due to rising costs for
borrowers
Macroprudential measures:
Loan-to-value capped at 80% (85% for first-time
buyers, which was already applied by Arion)
Residential mortgages by interest rate type (ISK bn)
Nominal rate loans are 59% of the mortgage portfolio at end of
Q1 2023. Demand for indexed loans is picking up again.
Interest rate reset profile for fixed rate mortgages (ISK bn)
The bulk of fixed nominal rate loans are reset in 2024 and 2025.
514
520
464
90
77
82
80
64
-40%
-41%
379
-36%
70
127
132
71
103
60
-49%
50
113
Debt service-to-income < 35% (40% for first-time
buyers). In June 2022, the Central Bank introduced
prescribed minimum interest rates for debt-service
which primarily affects indexed loans.
159
155
40
166
30
-64%
-60%
-59%
127
20
-51%
151
150
130
10
67
0
31.12.2020
31.12.2021
31.12.2022
31.03.2023
2023
2024
2025
2026
2027
>2027
■Fixed nominal ■Floating nominal
Fixed indexed
■Floating indexed
Nominal rates ■Indexed rates
Affects mostly first time buyers and higher loan
applications
Furthermore, the Bank has adjusted its criteria for
household expenditures in its payment assessment
taking into account rising cost of living.
Internal stress test of fixed nominal portfolio shows
that if interest rates remain high into 2025, up to one
third of borrowers need to seek lower monthly
payments, e.g. through refinancing to indexed loans.
In this stress test floating nominal rates reach a
maximum of 10.7%
Rate of defaults and payments past due
Non-performing loans are 0.9% of the mortgage portfolio, the same
level as before Covid-19. Loans past due are relatively stable.
1,2%
1,0%
Loan to value distribution 1
Loan-to-value below 80% accounts for 86% of the
mortgage portfolio.
40%
35%
34%
0,8%
30%
25%
0,6%
The stress test reveals that, following refinancing to
lower debt servicing, further measures may be needed
for 0.5-1% of borrowers
20%
19%
18%
0,4%
16%
15%
13%
0,2%
10%
0,0%
09.2022
10.2022
11.2022 12.2022
01.2023
02.2023
03.2023
5%
30 days past due
90 days past due
60 days past due
•Problem loans
0%
Less than 50-60% 60-70% 70-80% 80-90%
50%
19
1. Total exposure of a loan is in one bracket
1%
More than
90%View entire presentation