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Iceland’s Housing Finance Fund’s rating is under pressure as its funding restrictions weigh on its market share, Moody’s Investors Service said.
“Commercial banks’ non-inflation indexed loan issuance is credit negative for HFF, constraining its market share and franchise value,” Moody’s said. “It is credit positive for the commercial banks, which are strengthening their balance sheets and franchises through this collateralised household lending.”
The Baa3 rated government-owned lender reported a 40 percent decline in mortgage lending in the first half of 2012 from a year earlier, Moody’s said today in a weekly credit outlook report. Lending fell and the fund lost market share to commercial banks because it’s limited to inflation-linked funding and loans, the rating company said.
HFF is preparing to start offering non-inflation linked loans later this year, Chief Executive Officer Sigurdur Erlingsson in a telephone interview. The fund still has a 60 percent market share for Icelandic mortgages and a “few months” of declines doesn’t have a “significant impact on the overall picture.”
Once HFF is able to offer homeowners loans which aren’t indexed to inflation, the market will “seek its past balance,” Erlingsson said.
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