Mortgages start to decline

The rise in interest rates in Israel is starting to have an effect on the residential real estate market. The value of new mortgage loans taken last month was NIS 9.64 billion, the lowest level since May 2021 (excluding the Jewish holiday period last year). The figure represents a decline of 19% in comparison with August 2021, and of 5% in comparison with July this year. This is according to partial data published by the Bank of Israel on mortgage loans taken last month.

Interest rates started to rise in Israel in April, when the Bank of Israel raised its key rate by 0.25%. This and a 0.4% hike in May did not materially affect the mortgage figures. The third rise, in July, was 0.5%, and had a noticeable effect on the residential market (although volume and price statistics for July have not yet been published). In August, the Bank of Israel raised its interest rate by a further 0.75%, and it appears that the low level of new mortgages last month is the start of a decline in the number of transactions and in mortgage amounts that can be expected to last for a while.

The figures published by the Bank of Israel for August are, as mentioned, only partial, and do not break down mortgages by type of borrower (investors, Buyer Price program purchasers, and so forth). Detailed figures will become available towards the end of this month.

In July, the number of mortgage borrowers was substantially lower than in the preceding months, but the average mortgage loan rose significantly, reaching a record NIS 948,000. Buyers of homes in the open market who were not investors took mortgage loans averaging NIS 1.08 million, which is also a record.

Published by Globes, Israel business news – en.globes.co.il – on September 12, 2022.

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