"We have started examining the conduct of mortgage banks, and whether they colluded in raising interest rates. If, heaven forbid, we find evidence of coordination between banks, this will be dealt with," said Antitrust Authority Director General Michal Halperin during a discussion on rising mortgage interest rates in the Knesset Finance Committee.
Halperin commented on competition between banks and said, "In July 2015, all banks started raising their interest rates and we have started investigating this issue. Together with the Bank of Israel, we have seen that interest hikes appeared to be directly linked to the Bank of Israel's regulatory intervention, which attempted to limit the exposure of households and banks to mortgage risks. That is, mortgages have become more expensive primarily due to regulatory activity. We have been checking whether this regulation has been used an excuse to raise interest rates, we have received the data and are now investigating whether interest hikes have been a response to regulation or whether mortgage banks exploited this situation as a coordinated concentration group.
"In a world in which the intervention of banking regulators is so significant it will be very difficult to determine what was the result of regulation and what was not - this is a complicated economic analysis and it will take several weeks; we will act according to our findings. If we find explicit collusion, this will result in severe enforcement measures," she said.
MK Mickey Levy commented, "How can it be that all the banks have raised interest rates? This is a cause for significant concerns that they had coordinated their positions."
At the beginning of November, the Bank of Israel reported that the mortgage interest in different tracks had risen 0.15%-0.25%. This did not prevent the public from taking mortgages totaling NIS 4.9 billion in September. The volume of mortgages in September was 5% lower than the average monthly volume in the past year, NIS 5.1 billion.
The most noticeable trend in the different figures published by the Bank of Israel is that the mortgage interest rates have continued rising, reaching a hike of dozens of percent in a one year. In September, the interest in all tracks rose at an average of 0.2%. In the index-linked, fixed and variable interest tracks, it rose 0.25% and 0.23%, respectively, while in the non-linked, fixed and variable interest tracks, it rose 0.17% and 0.15%, respectively.
In September, the average non-index-linked track interest was 3.07%, crossing the 3% threshold for the first time in over a year. During one year, the interest in this track has risen 25%, from 2.44% in September 2015. In the index-linked track, hikes were even sharper, with an average interest rate of 3.45%, compared with 2.39% in last September, a hike of over 40%.
Average interest figures published by the Bank of Israel show that during the past year the banks' margin has doubled in certain loan tracks. For example, the average margin for loan with a 'variable-linked' interest for loaners seeking a financing of 60% and up of the property value, was 1.6% one year ago and is at present 3.28%.
The figures clearly show an alarming trend in which banks raise interest rates for disadvantaged sectors far more than they do for move-up home buyers and investors; the average 'fixed-linked' mortgage interest for young couples and disadvantaged sectors seeking a financing of over 60% of the property's value, has risen 1.3% since October 2015 - from 2.6% to 3.9%.
At the same period, the interest for investors and buyers with higher equity seeking a financing of only up to 30% of the home value rose only 1%, from 2.2% to 3.2%. Since May 2016, the average interest for fixed, index-linked, interest mortgages rose 0.45% for investors, while rising 0.58% for disadvantaged sectors.
Published by Globes [online], Israel business news - www.globes-online.com - on November 14, 2016
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