Íbúðalánasjóður - Company Announcement

Interest Rate Decision

According to paragraph 3, Article 21 of the Housing Act No. 44/1998, including
later amendments and Article 14 of Regulation No. 522/2004, on HFF mortgages
and bonds, the Board of the Housing Financing Fund has the authority to
determine the interest rates on HFF bonds based on financing cost from regular
auctions of HFF bonds on the one hand and on the weighted average financing
cost of prepaid loans on the other, in addition to an interest premium. 
HFF's interest rate decision is based on the yield at the HFF bond auction held
on August 6th     in addition to the weighted financing cost of prepayments on
HFF bonds.  The weighted interest rate for the auction and prepaid HFF bonds is
3.58%. 

HFF´s board suggested a 0.10% increase in the interest rate premium to the
minister of social affairs and social security. This was approved by the
minister and hence the premium for operations will be 0.45%, 0.45% for credit
risk and 0.50% for prepayment risk. 

As a result of the auction and the change in premium, the  HFF has decided to
leave interest rates on housing loans including a prepayment clause unchanged
at 4.50% and 5.00% on loans excluding such a clause. This decision takes effect
today, August 9th 2010.