A week ago, Deputy Governor of the Bank of Israel Dr. Nadine Baudot-Trajtenberg said that competition between mortgage banks was declining, and the mortgage interest rate was climbing (the current interest rate on index-linked mortgages is 2.9%, compared with 2% in May 2015). At the same time, it seems that more expensive financing is not deterring the general public, which continued taking large volumes of mortgages in May.
According to figures published today by the Bank of Israel, mortgages totaled NIS 5.4 billion in May, compared with NIS 4.7 billion in April and NIS 5.8 billion in May 2016.
Refinancing of old mortgages, which the banks do not like, because involves exchanging expensive loans for cheaper ones, was down from NIS 542 million (1,004 loans) in April to NIS 522 million (1,024 loans) in May, compared with NIS 1.7 billion (4,116 loans) in May 2015. Refinancing currently accounts for 10% of the mortgage market, compared with 30% a year ago.
The Bank of Israel's credit restriction on mortgages (financing for real estate can account for up to 20% of total credit, a proportion the banks are already close to) enables the banks to be very choosy in granted loans to tenants. Their caution stands out, in view of the housing buyers' level of risk.
No high-leverage financing
Only a few mortgages amounting to 75% or more of the value of the property were granted, totaling only NIS 4 million in May 2016, compared with NIS 6 million in April and NIS 101 million in May 2015. Mortgages with at least 60% leverage accounted for 32% of total mortgages in May, compared with 34% in April and 35% in May 2015.
The ratio of monthly mortgage payments to income showed great caution on the banks' part: loans totaling NIS 22 million were granted to housing purchasers having to spend 40% or more of their income on mortgage payments, compared with NIS 35 million in April and NIS 61 million in May 2015. In short, whether because of the risk in the residential sector, the Bank of Israel's capital requirements, or a lack of competition, the banks increased their interest rate on mortgages in recent months, and are also granting mortgages to much safer buyers.
Mortgages for properties sold at NIS 5 million or more reached a peak of NIS 223 million in May, compared with only NIS 207 million in April and NIS 207 million in May 2015. On the other hand, only NIS 23 million was granted for properties worth up to NIS 400,000 (including NIS 5 million with leverage of 60% or more), compared with NIS 118 million in May 2015 (including NIS 74 million with leverage of 60% or more).
Published by Globes [online], Israel business news - www.globes-online.com - on June 26, 2016
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