Israeli mortgage rates rise further

Mortgages Photo: Shutterstock

Israeli banks are no longer competing strongly for mortgage business.

Mortgage interest rates in Israel have continued to rise this month, according to Bank of Israel figures. The average rate on a CPI-linked loan has risen to 3.53%, compared with 3.3% in September and 3.19% in July-August. Rates have risen 1-1.5% in the past eighteen months, putting pressure on home buyers.

Interest rates on unlinked mortgages are also on the rise. The average rate on a shekel-denominated loan has risen to 3.14%, which compares with 2.94% in September and 2.89% in August. Rates on this type of loan have risen 1% in the past year.

The shekel interest rate for the whole period is calculated as the average of the fixed shekel rate and the floating rate. Although these are different types of loans, the Bank of Israel publishes the aggregate information, whereas in practice the fixed and floating rates are different.

The rise in mortgage rates in September is attributed to a decline in competition between the banks. This month too, mortgage consultants report that the major banks have decided not to fight over every mortgage. At the same time, the banks have been selling mortgage portfolios to financial institutions and insurance companies with the declared aim of reducing their exposure to the housing market and increasing exposure to the consumer market, where interest rates and hence profits are higher.

These trends, together with the anticipated interest rate hike by the Bank of Israel, can be expected to continue putting upward pressure on mortgage rates.

Published by Globes [online], Israel business news - www.globes-online.com - on October 18, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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Mortgages Photo: Shutterstock
Mortgages Photo: Shutterstock
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