Government plans to abolish mortgage interest subsidies, save ISK 800 million

Iceland’s government plans to abolish mortgage interest subsidies from 1 January 2027, saving the state treasury ISK 800 million, mbl.is reports. The measure is part of the government’s fiscal restraint programme and depends on the finance minister’s budget bill becoming law.

The abolition has been under preparation for some time. A previous bill extended the subsidies’ temporary calculation rules and reference amounts unchanged for one year, through 2026.

The bill states that the rules will be removed from the Income Tax Act from 1 January 2027. The provision will remain in force for decisions on subsidies relating to earlier years.

The government says housing support has increasingly been directed towards other measures. First-time buyers can use tax-free withdrawals from private pension savings to purchase their first home or pay contributions towards the principal of a loan secured against that home.

The government also refers to housing benefits, including rent subsidies, and shared-equity loans for home purchases.