Efforts by the Bank of Israel to tighten mortgage lending terms and deflate the housing bubble are not working: it reported a record NIS 5.5 billion in new mortgages granted in December 2010, 9.7% more than in November.
The previous record of mortgages was NIS 5.47 billion, set in June. Subsequently, in June and October, the Bank of Israel tightened lending terms by mortgage banks in an effort to raise the cost of mortgages.
The Bank of Israel's data reveals worrying developments in Israel's mortgages market in 2010, as rising home prices forces homebuyers to assume larger debts. The amount of mortgages granted in December 2010 was 19.5% higher than in December 2009.
The average mortgage in December totaled NIS 550,700, down from NIS 556,900 in November, but up from NIS 495,000 in December 2009. The Bank of Israel attributed the lower average mortgage in December, compared with November, to larger number of mortgages granted in December from the previous month.
Meitav Investment House Ltd. chief economist and strategist Ron Eichal said, "We may see the Bank of Israel grit its teeth for another 2-3 months, but if this continues, we'll see more macro-prudential measures to restrain the housing market. Limiting financing to 50% of an apartment's value could definitely happen, or else measures like the ones taken in China to limit financing to the real estate industry, increasing banks' liquidity requirements on large mortgages, and so on."
Published by Globes [online], Israel business news - www.globes-online.com - on February 6, 2011
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