Their banks may have hammered our pension funds,  but Icelanders are giving something back this year — at least to visitors. This fascinating land of geysers and volcanoes, which has also carved an urban reputation for hot clubs, cool bars and cutting-edge design is now at its most affordable in a decade. 

Devaluation — theirs — plus low-cost flights make this a great time to discover Reykjavik, the most northerly capital in the world, as well as the natural wonders of the nearby Golden Triangle.

Not that you would identify this motley collection of gaily-coloured tin-roofed buildings as a capital at first sight. 

Reykjavik today is almost as tiny, laid-back and villagey as when I was sent to knock on the door of the parliament 20-odd years ago and ask if the president could come out for a chat.

She did, and that ad hoc newspaper interview was a salutary introduction to the accessibility and friendliness of these people who are more akin to Brits than Scandinavians.  

The Vikings who arrived 1,000 years ago scooped up Celtic women on their way west and their descendants are, as a result, warmer, funnier and less inscrutable than other Nordics.

Their wild and woolly heritage — which Icelanders have only recently begun exploiting — is quite fascinating and worth checking out while in the capital. 

Lifelike figures star in audio-guided vignettes of how this young civilisation was formed at the Saga Museum in Perlan, a striking exhibition space at the top of the town. 

Above the museum is a revolving restaurant aimed at the fine dining crowd,  while the casual café has a scenic terrace which offers fabulous city views.

In the heart of town, an old Viking long-house was recently discovered during excavations, and a picture of life circa 1,000 has been engagingly mounted on the site at the Reykjavik Settlement Exhibition.  

But having explored the past, there is much to be seen during a weekend break of what today’s Iceland has to offer the tourist.

Fashion and design shopping tempt at every turn, notably on the main shopping street Laugavegur and the more exclusive Skolavordurstigur which leads up to Hallgrimskirkja, the distinctive, tall, white modernist church which is the city’s main landmark. Check out Spaksmannsspyarir, Steinunn and the more affordable E-Label on Laugavegur and Galleri 21 on the stroll up to the church.     

Down by the harbour, Gaga has wonderful one-off garments and some enviable sweater pins. In the unpromisingly-named Iceland Gift Shop nearby, M-Design’s wonderful long Icelandic wool cardigans are on sale at the best price in town.  It’s worth noting that 15 percent VAT refunds on purchases over about £20 are available instantly at the tourist office.

Tempting cafés everywhere provide an opportunity to rest the feet, and seriously good food is also on offer.   Sjavarkjallarinn, aka the Seafood Cellar, beneath the tourist office is one of the finest restaurants in Scandinavia, dispensing a quirky modern take on all things fishy, including  sushi as you’ve never experienced it before.  

Less pricey is the Fish Company across the road, a good place to try the creamy seafood soup which is a Reykjavik speciality, though not every version is for the observant.

It would be hard to find a more central and comfy perch than the Hotel Borg, an art deco jewel with astonishingly good service and an excellent buffet breakfast served with elegance.   There is also a pukka design hotel in town, The 101, a little more hip and cutting-edged.

Don’t leave town without spending a couple of hours at the Blue Lagoon, the largest and most luxurious of Iceland’s many natural hot springs.  The Lagoon also fields a full-service spa, an enticing shop and formal restaurant, since many visitors linger into the evening.   The Lagoon is more than halfway to the airport, and many bus companies offer the chance to make a visit the last — or even first — stop in Reykjavik.

It is really worth spending an extra day or two to get a glimpse of Iceland’s natural glories, and the most popular trip is the so-called Golden Triangle. This takes in Geysir, named for the eponymous spouting hot spring, Gullfoss, a thunderingly magnificent waterfall, and the breathtakingly beautiful Thingvellir National Park.          

The park — the site of Iceland’s first parliament, formed by the clan chieftains who instigated law-making gatherings here in the 10th century — is integral to Iceland’s history.  But what attracts visitors is the thrilling geography: the massive rift valley marking the point where North America separated from Europe, and views of the distant brooding Skjaldbreidur volcano.

After marvelling at the shifting earth, the smouldering lava cone, the bubbling hot springs and the rushing water — a microcosm of the wonders to be found all over Iceland — wind down by getting up close and personal with another of the country’s magnificent legacies — the beautiful horses which have stayed true to their breed since being introduced 1,000 years ago.  

Although they can be seen roaming freely in the countryside, the family horse display near Geysir allows visitors to learn about their special attributes as they’re put through their paces in an arena, and then after, to pet their beautiful noses in the stables.         

Coach tours covering all these high points in a single day are available at the drop of a hat, but it’s worth driving yourself, or taking a private guided tour, to get the most out of the experience and be able to spend as long as you want in each place. 

Jon Baldur’s Isafold tours in rugged, four-wheel drive vehicles offer the chance to get off-road in this magnificent terrain and go for some extra thrills. Fording rivers and driving on the glaciers of Iceland’s south coast are both on offer.

When to go is a moot point — days are very short between now and April.   But winter offers the best chance to see the Northern Lights, and even the coldest days can be crisp, clear and bright, and heady with intoxicatingly fresh air.

Getting there

Iceland Express (www.icelandexpress.com) serves Reykjavik from both London and Birmingham from £178.00 return. Abercrombie and Kent Private Travel(020 7173 6440, www.abercrombiekent.co.uk) offers two nights at the Hotel Borg including flights and transfers from £599.  Isafold tours: 00 354 544 8866, www.isafoldtravel.is