Israel’s mortgage market remained strong last month as homebuyers took out mortgages totaling NIS 8.4 billion in August, the Bank of Israel reported. Mortgage takings last month were down 7% from July when more than NIS 9 billion in mortgages were taken out but were 20% higher than August 2023.
Concerns about inflation are affecting the type of mortgages taken out, with a historic low of just 23% of mortgages being indexed to the Consumer Price Index, compared to 33% eighteen months ago.
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The average interest rate on CPI-indexed mortgages is 3.3%, compared to the average interest rate of 4.9% on non-CPI-indexed mortgages.
Standard balloon loans
Short-term balloon loans taken by contractors continue to reach record amounts. These are bridge loans that take advantage of popular financing deals, where apartments are purchased with a particularly low down payment at the time of signing the contract (5% to 20%), and the balance is paid only at the time of occupancy, when the apartment is built. According to the data, NIS 1.4 billion were taken out in such loans in August. In August 2023, balloon loans were much lower, amounting to NIS 629 million.
The Bank of Israel had previously warned of the risks in this activity, among other things in cases where buyers will not be able to meet the high payments after occupancy, and also due to the liquidity risks for companies, which report high revenues without actually “seeing” the money for a long time.
This article was published in Globes, Israeli Business News – en.globes.co.il – on September 10, 2024.
© Copyright Globes Publisher Itonut (1983) Ltd., 2024.