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Mortgage ratio reduction criticized

Ingibjörg Thórdardóttir, head of the real estate association in Iceland, casts doubts on whether the government’s recent mortgage ratio reduction at the state-run Housing Financing Fund (HFF) will keep the economy from overheating.

Thórdardóttir said most people who take loans from the HFF don’t take loan for 90 percent of their properties’ value, so she predicted reducing the ratio from 90 percent to 80 percent would not change much for the economy, Fréttabladid reports.

Thórdardóttir said rising real estate prices were the cause of the economic expansion, and not high mortgage ratios and stated the reduction would have the worst impact on those who buy properties worth less than ISK 20 million (USD 321,000, EUR 236,000).

According to the HFF, 127 people took a 90 percent loan during the first five months of this year, during which between 4,000 and 5,000 apartments were sold. The HFF’s average loans are for 60 percent of the properties’ value or less.

Gudmundur Bjarnason, the managing director of the HFF, also believes the government’s measures will not have much of an effect on the economy overheating.

Click here to read yesterday’s story about the mortgage ratio reduction.

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