“My situation is such that I am a prisoner of a way too small apartment for the next 35 years”, says Rakel Sölvadottir in today’s Morgunbladid. Rakel bought her apartment in 2004 and has made every payment since. But because of inflation and price-indexation her loans are now 30 million and her apartment’s market value is at most 24 million. Rakel has two children, one with special needs and they are now stuck in an apartment that is too small, even though she has never defaulted on her loans.
This is the definite picture of a people that have been left to carry the burden of keeping inflation down by themselves. The citizens of Iceland are going to be price-indexed to death. The government, people who own their own homes because they didn’t face the same unjustice when they were starting out has not offered any real solutions to combat the crippling effects of price-indexation on Icelandic homes.
The options available to home-owners and families at the age of 25-45 today seem to be narrowing down to:
A) Bankruptcy – rather ten years than thirty-five in a prison of debt
B) Exodus – to escape from a country that offers no future
C) Suicide – so that your family can get what price-indexed savings you have in your pension funds to do option B for themselves
So far, it is known that all options have been used by some people.
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Vilhjalm A.
2 years ago
These Icelandic “consumer laws” are very cruel. Most mortgages in the US are non-recourse, which means that house purchasers can walk away from their homes at any time and give them back to bank, without being liable for the difference in purchase price and the price that the bank re-sells them for. Personal bankruptcy has gotten harder in the US in the last few years but you can still get it over in 3-5 years, not 10 years. And indexing is obviously a grotesquely unfair mechanism.
I imagine there will be a large-scale revolt against these Icelandic rules, or various new schemes will arise to get around them. Marriages of convenience. Houses “accidentally” burning down (“I left my cigarette next to the the cooking grease”). Selling “underwater” houses to fake trusts, very old people or to foreigners. Icelanders giving up their citizenship and returning in a few years as foreigners with a new number or name.
Really, most people with any sense will realize that it’s a pain in the ass to be an Icelander and just leave.