My life and the life of so many of my friends has taken an extreme turn in the last year.
Now we can safely say with the benefit of hindsight that the economic collapse of Iceland has been a life-changing event for just about everyone.
Old truths have been demolished, new governments have been formed, old kings have been dethroned and so much planning has gone out the window.
As my girlfriend and I look at our mortgage as August melts into September we see it has grown 25% in the last three years. If it keeps growing the way it has since we signed on, it will have doubled in ten. Sixteen million owed to the bank will become thirty two with thirty years still running.
That is the beauty of price-indexation for you. The solution that has allowed every government in Iceland since the early eighties to stick their heads in the sand and neglect serious economic issues.
A friend who is 25 has been talking to her bank about solutions regarding her foreign currency mortgage. Starting with a loan around 45 million ISK, it is now above 100 million.
She said the last payment she made a year ago before getting it “frozen” was over 400.000 ISK. She said she felt stupid to pay it.
What sort of future can we expect to build in a country like this? She and her spouse have two options on the table, bankruptcy and moving abroad. Others, facing these kinds of problems as well as marital difficulties find it impossible to divorce.
Two out of three of our friends who lost their jobs last winter have gotten new ones. But they are working more, being paid less and now one is being let go again because of “restructuring” in his company. The third one is still looking.
Everyone is waiting. What is going to happen this winter?
I for one am going back to school. Tomorrow I will start studing for a master’s in International Relations at the University of Iceland’s Political Studies department. My reasoning for this new venture is to build towards a future where I can participate in warning people about the ills that have plagued Iceland. Meanwhile I will be coaching football to put some bread on the table and service the price-indexation beast.
I am continuously amazed by the number of visits to this site. I know I have had my ups and downs in maintaining it and keeping it updated but it is a labour of love and definitely provides no food for the monsters of price-indexation. There are a couple of good sites out there in English that are well-maintained. I encourage you to read them too. Check out IceNews, IWR, Iris at HuffPost, Iceland Review, Newsfrettir, IcelandTalks and the Grapevine.
Please continue to check in, there are many layers to the Iceland story and hopefully I can provide some insight without resorting to stories of “hardy bunch” and “nation of fishermen” and “fire and ice”. I have yet to tell the story of myself as a banker, and when the distance is appropriate where I can seperate between the blurry lines of recent memory then it will come.
The Vikings of Iceland exist only in our minds today. Although some people here act cool and others claim the elfs have told them to be kind to the earth and everything will be fine, we are in reality just a group of people who have been raped and plundered and are left insecure, hurt and confused.
I’m excited to be back at school. I recently asked myself when I’d been the happiest in life and the answer was in college so there I go. The combination of meeting new people and exploring ideas is irresistible and I’ll try to make sure my life revolves around being a “college student” from now on. And if I cannot pay my mortgage then it doesn’t matter, I did not sign up for this crap in which we Icelanders are in up to our knees and I will continue to meet it head on.
Related posts:
An Extreme Turn For Myself And Other Icelanders | my mortgage wish
2 years ago
[...] here: An Extreme Turn For Myself And Other Icelanders Share and [...]
Easy
2 years ago
Nice article honestly, but just one question, didn’t your friend who is 25 I say it again 25, I can not repeat it enough 25. felt STUPID taking a 45 MILLION LOAN I repeat 45 MILLION? I mean that feeling of stupititi she felt when she had to pay 400,000ISK she should have felt it when she asked for the loan, (an I supose she was not even 25 when she took the loan). Then what were banks doing, when lending practlicly teenager millions of krona? some times people get what they deserve, and some times I think we as a nation are ripping the fruits of what we planted.
Robert Caulfield
2 years ago
No country should be involved in international banking if they can´t understand the idiocy of indexed loans. As a matter of fact they probably shouldn´t even have a domestic banking system if they can´t see the idiocy of indexed loans. Bartering is probably a better answer. It´s less sophisticated but subject to much less criticism in the end.
Carl Mosconi
2 years ago
Best wishes to you Dadi in your continuing education endeavor!. You have have been very instrumental in bringing to light that which others have tried to conceal. The common folk that dwell on this small island in the North Atlantic owe you a debt of gratitude for you continuing efforts in exposing those evil doers who no longer deserve to be called Icelanders.
You said it, you said it all. | Independent Icelandic News
2 years ago
[...] I just saw a fantastic article on the EconomicDisasterArea website. I reminded me of a scene from Forrest Gump. When Gump talks about the war in Vietnam, but the microphone is turned off. Here is what that speech was about if it would have been about the Icelandic economy, and the general situation in Iceland. Great article Dadi, and kudos for the link. [...]
Chosan
2 years ago
Great article Dadi…
It was reposted here:
http://icelandtalks.net/?p=716
Dadi
2 years ago
Easy, good question. The friend took the loan with her fiancée who is well older. It was supposed to be their future home. The home was built by themselves in 2007 and appraisals indicated a nice home equity once they moved in.
I would never have taken a currency loan myself but that is only because I worked in a bank and had heard the discussion from my superiors “don’t advise people to borrow in foreign currency”. I actually advised a friend not to take one but he talked to two higher ups in the bank and they both told him it was the way to go. He asked me why he should listen to me and not two people who were older and in more important positions.
It is commonly accepted that when negotiating with a bank, the bank has considerable advantage(through knowledge, risk-tolerance etc). I cannot blame people who are not savy in the world of international banking and therefore at a disadvantage when predicting the way currency markets fluctuate.
A 45 million ISK mortgage seems ridiculous right now but in 2005-2007, it was assumed to be “average” for a mortgage. I wholeheartedly agree with you that it is mindblowingly risky to assume this sort of mortgage at that age but the environment contributed to this madness, for better or worse.
What the whole Icelandic debacle tells me is that we had a useless currency that fewer and fewer people trusted and more and more people wanted to escape from. Icelanders are not greedier or more stupid than the citizens of Western Europe or the US for example. We were just living in a make believe economy. A 25 year old is not supposed to know better, neither is someone 15 years older who’s skills lie elsewhere. Those who were supposed to know better (government, financial institutions, media etc) didn’t either or didn’t care.
Ps: Thanks Carl
Paul H
2 years ago
Hæ Dadi,
Only just discovered your site.
Thanks for putting it out here on the web.
I am following events in Iceland closely.
We just bought a summer house as a second home in Iceland (after we fell in love the with country and its people about 3 years ago, before the kreppa).
It’s painful to hear about what people are now left with.
Iceland and its people are in our thoughts and prayers.
(At least those not responsible for the mess.)
Here’s wishing you all the best with your new endeavours.
Indexed loans seem to be an inescapable trap, we are not borrowing from anyone.
Einar Örn
2 years ago
“A 45 million ISK mortgage seems ridiculous right now but in 2005-2007, it was assumed to be “average” for a mortgage.”
Really? Average?
Dadi
2 years ago
I agree Einar, it seems absurd.
What I meant was that at that time you bought an average house for that money in Reykjavik. Small flats were between 16-24 million, large flats more.
Real estate bubble anyone?
Imagine A Whole Nation Rebelling Against Its Financial System
2 years ago
[...] I would like to repeat something I said in a reply to another thread here; It is commonly accepted that when negotiating with a bank, the bank has considerable [...]