Arion Bank changes in­terest rates on 27 Novem­ber

On Thursday, November 27, the following changes to consumer lending rates and deposit rates for consumers and businesses will take effect:

Residential Mortgages

• Non-indexed fixed residential mortgage rates for three years decrease by 0.20 percentage points to 8.10%

• Non-indexed variable residential mortgage rates decrease by 0.25 percentage points to 8.94% (new loans not currently available)

• Indexed variable residential mortgage rates decrease by 0.20 percentage points to 4.59% (new loans not currently available)

Prime Rates

• Non-indexed variable prime rates decrease by 0.25 percentage points to 10.10%

• Indexed variable prime rates decrease by 0.20 percentage points to 6.25%

Car Loans

• Car loan prime rates decrease by 0.25 percentage points to 10.50%

Overdraft Rates

• Overdraft rates decrease by 0.25 percentage points to 15.00%

Credit Cards

• Installment and revolving credit card rates decrease by 0.25 percentage points to 15.00%

Deposits

• Rates on indexed accounts decrease by up to 0.20 percentage points

• Rates on non-indexed accounts decrease between 0.05-0.50 percentage points

Changes to loan rates subject to consumer credit laws or consumer mortgage laws will take effect in accordance with the loan terms and interest rate change notifications. The same applies to changes in deposit rates subject to payment services legislation.

Arion Bank's lending rate changes are based on the bank's funding costs at any given time, as well as other factors, including credit risk. The bank's funding costs partly follow the Central Bank's policy rates, but other funding sources also have significant impact, such as customer deposits, market funding, foreign bond issuance, and equity instruments.

The 0.25 percentage point reduction in variable rates for non-indexed residential mortgages is primarily due to the decrease in the bank's funding costs resulting from the policy rate cut, mainly through lower deposit rates. The bank's profitability from these loans decreases when rates fully follow changes in policy rates, but current market conditions warrant this approach at this time.

For indexed residential mortgages, the bank is lowering variable rates by 0.2 percentage points based on its assessment of changes in short-term real interest rates that affect the bank's funding costs. The rates are not decreasing fully in line with the policy rate change since short-term inflation has not decreased to the same extent, as the Central Bank of Iceland's Monetary Policy Committee's decision is based on tightening credit terms rather than inflation trends. The change is also consistent with developments in the yield of indexed government bonds and covered bonds.

This news was updated on November 25, 2025.