Although exporters are getting clobbered by the plunge in the euro, mortgage owners can benefit big-time. A study by AMG Financial Models has found that the drop in the shekel-euro exchange rate from over NIS 5.50/€ in September 2009 to the current level of NIS 4.83/€ saves holders of euro-linked mortgages tens of thousands of shekels on their loan repayment.
AMG CEO Amit Kaminsky said, "A borrower who took a euro-linked mortgage loan, in whole or in part, the loan is linked to the shekel-euro exchange rate on the date the loan was taken. In other words, if he took a €100,000 loan when the shekel-euro exchange rate was NIS 5.50/€, he received NIS 550,000, which was transferred to the seller of the apartment. Now that the exchange rate has fallen to NIS 4.83/€, the loan debt has fallen to NIS 483,000.
"If that borrower with the euro-linked mortgage repays the loan today, and replaces it with a shekel loan, he will repay the bank tens of thousands of shekels less than the original amount taken."
Kaminsky estimates that 10-15% of mortgages in Israel are euro-linked mortgage loans, in whole or in part.
As to the question whether it is worthwhile waiting for a further drop in the value of the eruo before repaying a euro-linked mortgage, Kaminsky said that the plunge in the shekel-euro exchange rate was an extraordinary opportunity to repay, and it was pure speculation if the exchange rate would fall further. "It seems better to save tens of thousands of shekels today, rather than risk that the euro will recover, and quickly, to its usual level," he said.
Published by Globes [online], Israel business news - www.globes-online.com - on May 6, 2010
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