Many borrowers switch from prime-linked mortgages to index-linked mortgages, which is considered a dangerous step that will affect inflation. Yonatan Berliner, chairman of the professional committee at the Association of Mortgage Consultants, spoke with Anat Davidov, explained the differences and the state of the market in Israel.
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“The average mortgage in the market is still about one million shekels,” Berliner noted. “Following the half percent increase, there is an addition of NIS 120 per month to the monthly repayment, and a total of NIS 36,000 throughout the life of the mortgage. When it comes to an average mortgage for 25 years, the annual increase is NIS 1,440.”
“It is very significant,” he added. “This is an increase that joins all the increases that have been here throughout the last year. What’s more, it should be remembered that most mortgages are over one million shekels. There is a distortion in the average. When we talk about mortgages of one and a half million shekels, the numbers are of course much higher. There we are talking about an increase of 180 Shekels in the monthly repayment, and 53 thousand shekels throughout the life of the loan.”
When asked, “Is it worth leaving the prime route for an index-linked route?”, Berliner replied that the move is not correct, and explained: “Transferring mortgages from the prime route to an index-linked route is not considered profitable today. Unfortunately, what you describe is happening today mainly in new mortgages. In the last quarter We see a significant decrease in the prime routes, and a very sharp increase in the use of adjacent routes which are much, much less profitable, both in the short term and in the long term.”
He added that the move was made only because of the difficulty in meeting the monthly repayments. “People who come today to take out a mortgage sometimes don’t meet the regulatory short-term repayment. In fact, the regulation pushes people to take routes linked to the index which are considered much less profitable, and the banks price them accordingly with expensive interest rates.”
“A lot of people have trouble paying a mortgage,” he noted. “People feel it on a monthly level, they have to sort out all their expenses, and it’s oppressive. It’s not just that there’s a big outcry – it’s not at the level that mortgages are coming back, but it’s hard for people.”
Assisted in the preparation of the article: Eden Ben Ari, 103FM