An all-time high of NIS 4.93 billion in new mortgages were granted in July 2012, 25% more than in June, the Bank of Israel reported today. The amount of new mortgages issued in July was 108% higher than the more recent low point of NIS 2.3 billion in October 2011.
The Bank of Israel began cutting the interest rate in late 2011. The interest rate has been cut from 3.25% in September 2011 to 2.25% today as Governor Stanley Fischer began grappling with the impact on Israel of the global economic slowdown and the debt crisis in Europe. The Bank of Israel has argued that the interest rate cuts would not reinflate the mortgage market because of the mortgage restrictions it imposed last year. The minutes of a monetary committee meeting earlier this year said that the mortgage restrictions had weakened the transmission between the interest rate and housing prices.
However, in response to data for subsequent months which have indicated that home prices are rising, the Bank of Israel has sounded more hesitant. It has stated that it will consider new measures to restrict mortgages, but it has not done anything. The minutes of the Monetary Committee in July, which decided to cut the interest rate for August, states, "The current rate of increase in prices does not indicate a renewed trend of price increases, but the risk inherent in a future renewal of such a trend cannot be ignored. It was likewise noted that the housing market has an important role in motivating economic growth, especially in light of moderate demand in other sectors."
Today's mortgage figures leave no room for doubt: the real estate market is bubbling. NIS 3.65 billion in variable interest rate mortgages were issued in July, along with NIS 1.26 billion in fixed-interest mortgages. The amount of variable interest rate mortgages was 57% more than in June.
Published by Globes [online], Israel business news - www.globes-online.com - on August 14, 2012
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