Repeated periods of inflation‐deflation in the vicinity of Mt. Thorbjorn‐Svartsengi, SW‐Iceland, were detected in January–July, 2020. We used seismic ambient noise and interferometry to characterize temporal variations of seismic velocities (dv/v, %). This is the first time in Iceland that dv/v variations are monitored in near real‐time during volcanic unrest. The seismic station closest to the inflation source center (∼1 km) showed the largest velocity drop (∼ 1%). Different frequency range measurements, from 0.1 to 2 Hz, show dv/v variations, which we interpret in terms of varying depth sensitivity. The dv/v correlates with deformation measurements (GPS, InSAR), over the unrest period, indicating sensitivity to similar crustal processes. We interpret the velocity drop to be caused by crack opening triggered by intrusive magmatic activity. We conclude that single‐station cross‐component analyses provide the most robust solutions for early detection of magmatic activity.