Bank of Israel figures released today show that mortgages taken in October totaled only NIS 2.8 billion, the lowest monthly figure for a long time. Keep in mind, however, that the Jewish holidays High Holy Days took place in October this year, reducing the number of working days in the month.
At the same time, the total is less than predicted by the banks, which expected October mortgages to total at least NIS 3.5-4 billion. It is premature to conclude from the October figures that the trend has changed, but the projections for November, a regular month, support the likelihood that the mortgage boom is starting to wane.
Banking sources believe that November mortgages will total NIS 4.5 billion. The monthly average over the past year has been NIS 5.2 billion, so the projection is 13% below this average. The sources added that it is premature to say that the trend has changed, and it is best to wait for the figures in the coming months before drawing conclusions, since the demand for housing is still strong, and supply has not yet caught up with it.
A few months ago, the banks believed that new mortgages in 2016 would total NIS 60 billion. It now appears that this will not necessarily occur. Mortgages totaled NIS 49.5 billion in January-October, and at the current rate, it is possible that the NIS 60 billion barrier will not be crossed this year. Meanwhile, a different trend has begun to emerge and is helping to cool the market down: a rise in interest rates.
This trend in the mortgage market also continued in October. For example, the interest rate for unlinked mortgages at fixed interest averaged 4.27% in October, compared with 4.19% in September and only 3.61% at the beginning of the year. In other words, the interest rate has shot up by 18% since the beginning of the year. The trend in interest rates was also rising for other types of mortgages. The interest rate hikes were due to regulatory instructions by the Bank of Israel, but the Antitrust Authority is currently considering whether the banks coordinated these increases with each other.
Published by Globes [online], Israel business news - www.globes-online.com - on November 24, 2016
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