Decline in the number of mortgages, while average borrowing increases

Mortgage borrowing continues to slow, but the average mortgage loan has hit new highs, according to figures released this week by the Bank of Israel.

In July, 9,709 mortgages were taken out, compared to 12,024 in June and 12,064 in July 2021. This represents a drop of 21% on the month and about the same on the 2021 figures.

The number of mortgages in July was the lowest since September 2021, when 7,779 loans were taken out.

Investment buying is also slowing. Investment property loans are down to 1,062 in July this year from 1,691 in July 2021, down 37%.

The aggregate value of loans in July fell to 10.1 billion NIS ($2.97 billion), from nearly 11.9 billion NIS ($3.5 billion) and 11.5 million NIS ($3.38 million) in July 2021. Most loans are between 60% and 75%. the value of the mortgaged property.

Meanwhile, the average mortgage in July was around NIS 1.08 million ($317,000)

CBS’ latest housing report shows June data suggests prices rose at an annual rate of 17.8%, the fastest in a decade.

The main offices of the Bank of Israel in Jerusalem on August 12, 2021. (Yonatan Sindel/Flash90)

Higher interest rates, which directly affect the affordability of new mortgages, are part of the problem. Just last week, the Bank of Israel carried out its largest increase in two decades in the benchmark interest rate, raising it by 0.75 points to 2.0% as inflation hit 5, 2% in the last 12 months. This follows another 0.75% increase in July, and it is expected that rates (and therefore monthly mortgage payments which are not fixed but are somehow linked prime rate) will increase accordingly.

But real estate agents across the country are reporting a shortage of properties for sale. Given that other economic indicators are relatively healthy, potential sellers may well be waiting to put their homes on the market thinking that, even over a few months, they could be asking for a lot more.

The mortgage market is notoriously complex. The Bank of Israel is also trying to make the process of taking out a mortgage easier and more transparent. This week, the bank introduced a new dedicated website that explains the details a potential borrower should know about alternative mortgage types, helps them understand how much they can borrow, and offers questions to ask themselves as well as to any lender.

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David Horovitz, founding editor of The Times of Israel

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