New mortgages soar on low interest rate

The amount of new mortgages in March was 44% higher than the low point of NIS 2.3 billion in October 2011.

Banks granted NIS 3.4 billion in new mortgages in March 2012, 14.4% more than the NIS 3 billion granted in both February and January, the Bank of Israel reported today.

The amount of new mortgages in March was 44% higher than the low point of NIS 2.3 billion in October 2011, three months after the Bank of Israel tightened mortgage terms, capping the variable interest component of a mortgage to one third of the total. The total of variable interest mortgages rose by 42% in October-March, although their proportion of total mortgages fell from 75.8% to 74.5%.

During the period, the Bank of Israel cut the interest rate from 3.25% in September 2011 to 2.5% in February 2012. Macroeconomists expect the Bank of Israel to keep the interest rate at this level for several months, and to begin raising it toward the end of the year.

The biggest increase in new mortgages in March was in variable interest mortgages, both linked to the Consumer Price Index (CPI) and unlinked, which rose by 13.7% to NIS 2.55 billion in March from NIS 2.24 billion in February. New fixed-interest mortgages rose to NIS 872 million in March from NIS 750 million in February.

The Bank of Israel has said in the past few months that the interest rate cuts would not reinflate the mortgage market, because of the macro-prudential measures taken to restrict lending would counter the rate cuts. However, the minutes of the monetary council for the April interest rate decision indicate that the Bank of Israel is again considering intervening in the mortgage market.

Published by Globes [online], Israel business news - www.globes-online.com - on April 17, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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