Interest rates on index-linked mortgages provided by mortgage banks are falling in line with Governor of the Bank of Israel Prof. Stanley Fischer’s decision to keep the interest rate unchanged. After rising 0.71% over ten months, the average interest rate on index-linked mortgages has fallen 0.04% since the beginning of March to 4.81%.
The drop may be brief, and the upward trend in interest rates on index-linked mortgages could resume if the Bank of Israel raises the interest rate on March 27, the day before the elections.
The lowest average interest rate on index-linked mortgages is 4.58% on 5-12 year loans, and the highest average interest rate on index-linked mortgages is 4.9% on loans of up to five years.
Three-month short-term loan (STL) yields are 5.25%, 0.5% above the current interest rate of 4.75%, and 12-month STL yields are 5.62%, 0.87% above the current interest rate.
Most bank and investment house analysts predict that the Bank of Israel will raise the April interest rate by 0.25% to 5%, after keeping it unchanged for two months. The Bank of Israel has not yet begun its monetary discussions, which will not include former deputy governor Dr. Meir Sokoler the first time since 1975. If new Federal Reserve Board Chairman Ben S. Bernanke raises the US interest rate, the Bank of Israel will almost definitely follow suit.
Published by Globes [online], Israel business news - www.globes.co.il - on March 12, 2006
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