I have repeatedly brought up the madness associated with price-indexed home loans. Today, Silfur Egils published a heartbreaking letter that describes the situation that is facing the majority of Icelanders. Keep in mind while reading this letter that Geir Haarde owns his home outright, that Bjarni Armannsson, the head of Glitnir is sitting pretty in Norway with the billions that he got out of the bank and that David Oddson is still the Central Bank governor. Geir and David privatized the banks and failed to regulate them, bank-managers like Bjarni played the market with criminal behaviour like the one surrounding Stim and people like the one who is writing this letter have tried to save and buy sensibly during the same period. 

I hope it is OK that I have extracted samples from the letter and translated in English. I think it describes the situation in a way Geir Haarde and Ingibjorg Solrun Gisladottir could never explain to foreign journalists. 


In 2005 I bougth an apartment for 22 million ISK. I had saved up 10 million ISK after 30 hardworking years. I borrowed 12 million from SPRON on 4.15% interest, price indexed. The price of the apartment rose to 25 million ISK, but I intended to stay here until my kids had left home in the next 5-7 years, then get a smaller apartment and for the first time in my life have something left over on my wages, but I am 55 years old right now. 

The monthly payments were 51 thousand ISK in the begining and everything seemed alright even though the Central Bank’s inflation-expectations of 2-4% never came close. 

Three and a half years later, my situation is this: 

The loan has risen to 15,2 million ISK and the price of the apartment is 18-19 million. I am trying to sell the place to no avail, because nothing is selling anyways. I have been laid off at the bank where I work and I will be on unemployment benefits in two month’s time. 

I am told that in the NEXT 12 months or so, my loan will rise to at least 18 million, even higher and the price of the apartment will plummet to 16-17. My equity, 10 million ISK, no small pennies for a woman who has worked all day all her life and gotten three kids through college, is gone, just gone and no one seems to think this is a big deal. 

I am told I can just stay in the apartment, keep paying high monthly payments that I need two jobs to support, if I am lucky enough to find one job, let alone two. Even if I slave through those jobs until I die, I will never do anything but just get by and the loan will keep on rising. 

The property will slowly rise in price again, I am told but oh no, then inflation will also rise and the loan alongside it. 

So, in one year I will have no equity left and will be considered lucky if I can keep up with the monthly payments. If the bank takes the apartment, then God only knows if I will get out of it still owing money or just even. If it is the former then I’ll have to declare myself bankrupt.  And that is me, the one who saved, bought sensibly, robbed of my life’s savings and posessions. And everyone is talking about the great solution of extending their loans!

Nota bene, if I extend my loan to 70 years, then I will have paid 1.354.824.000 ISK for the 12.000.000 that I borrowed in the spring of 2005. Yes, mark my words, one billion, threehundred fiftyfour million, eighthundred twenty four thousand, on 4.15% interest + the same inflation as in the last 40 months, 26%. And I haven’t even included the rise in inflation that is expected in the next 12 months. 

Those of us in that situation will probably just leave our apartments, like they do in the US. When the largest chunks of our pay disappears into the loans or the rent as they will call it then, then we will just walk out, stop paying. Then, when everyone stops paying, the economy will finally capsize according to economists.

This might happen late next year or early 2010 according to forecasts. What will happen then? I am not going to live through that I tell you. The nature of Iceland will still belong to me, no matter what bank goes bankrupt and I will lie down in her on a cold enough night, “thank” everyone for the pleasure and wish the rest of you all my blessings.


7 Responses to “Heartbreaking”

  1. 1 Kjartan December 1, 2008 at 12:50 am

    Who are you to criticise? You can’t speak for a whole nation. Who knows, maybe every other Icelander apart from you vehemently supports the government and what they’ve done, are doing and haven’t done?! Heil Geir! Heil Ingibjörg! God bless Iceland!!!

  2. 2 Friedrich December 1, 2008 at 3:55 am

    Heil is right. When the Icelandic banks turn over all their assets [mortgages] to German creditors, Reykjavik will become New Leipzig.


  3. 3 Roy December 1, 2008 at 8:32 am

    Kjartan speaks for the skinheads not the average Icelander!

  4. 4 Sæunn December 1, 2008 at 9:06 am

    In a republic there should be room for both sides of story and throwing blasphemy at each other does not make things better. We all have to learn to face criticism and answer with logic, not just with what wee FEEL is personally best for ourselves.

  5. 5 Roy December 1, 2008 at 9:51 am

    Blasphemy is a victimless crime!

  6. 6 Sæunn December 1, 2008 at 12:34 pm

    Do you need crime, whether it be a victimless one or not, would you chance that you “victimless crime” really did have a victim, just one that you did not know about?
    P.S. Does not the word “crime” indicate a victim

  7. 7 Kjartan December 1, 2008 at 6:58 pm

    I was actually indirectly quoting our foreign minister and the woman most people seem to want as prime minister when she said that a 2000-strong citizen’s meeting protesting the government did not necessarily represent the nation. This at a time where opinion polls showed 70% of those who answered said they did not trust the government…

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