Iceland’s Supreme Court announced on Thursday that the Central Bank’s most beneficial non-indexed interest rates are to replace foreign currency indexation and the interest rates that were originally agreed upon in the case of car loans. This confirms the ruling of a lower court.
Supreme Court in Reykjavík. Photo: Páll Kjartansson/Iceland Review
Immediately following the verdict Minister of Economics and Commerce, Árni Páll Árnason, said that he will put forward a bill to Althingi stating that all loans in foreign currency to individuals for house- and car-loans be treated as being illegal, regardless of how the contracts were worded.
This should sort out a jungle of loans in foreign currency and could speed up the process of sorting out financial problems of individuals.
The proposal should not have any effect on the loans of companies.
Már Gudmundsson, director of the Central bank of Iceland, says that the ruling means that the banks will be able to bear the burden that the Supreme Court’s ruling that loans indexed to foreign currency were illegal.