Been too long since I was in Borgarnes, but here is some overall fishing information for all of Iceland including the Borgarnes region. Trust that no one will let you get a fishing permit and not inform you as to bait availability. review this and its various pages. Find a farm in the region that does fishing trips.

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.....and finally this one, which may be right up your alley. And don't worry, you will not be wanting for bait. if you go with a local, they will make sure you have it, and if you go solo, it will be easy to find.

[original link]el/fishingiceland/salmonfishingrivers/flokadalsa

Good luck and enjoy my country.........d:o)