“Ms Mósesdóttir bought a house in 2005 but, unlike many Icelanders, she declined to take a new type of loan being offered: foreign currency loans in yen or Swiss francs designed to take advantage of low interest rates abroad while Iceland’s own rates hit double digits.
That foresight and prudence – the repayments soared as the krona collapsed in 2008 – turned out to be nothing of the sort. Mortgages using foreign currency were declared illegal. Ms Mósesdóttir and a majority of Icelanders had taken out index-linked mortgages, which turned out to be a poor choice as the plummeting krona stoked inflation. According to a recent report, inflation added IKr226bn ($1.8bn) to household debt from 2009 to 2012.”