Minister of Social Affairs Árni Páll Árnason presented ideas on debt relief for homeowners at the Interest Group of Households yesterday, which involve that the capital of mortgages remains indexed but down payments will be connected to the wage index.
“This appears to be a step in the right direction but I suspect that a lot more needs to be done,” board member of the interest group Fridrik Ó. Fridriksson told Fréttabladid, adding that it is too early to comment on the ideas in further detail.
The interest group is planning a payment strike as of October 1 if the government doesn’t take proper action to ease the debt burden of households.
Other ideas presented by Árnason include that debt load be moved back to its status of May 2008 to secure lower down payments, which could happen as early as November 1.
US economist Joseph Stiglitz mentioned wage indexation of down payments as a solution for indebted households during his recent visit to Iceland.
However, Jón Bjarki Bentsson, an Icelandic economist, has mentioned various disadvantages that might come with this method, pointing out that the wage index has increased by 29 percent in excess of the consumer price index since 1991.