The figure that everyone knows is the figure of the average – what is the average height of the children in the class, the average of the grades, the average of the salary, etc. But there is a figure no less important than that and it is the median. The median is the middle number within that group, such that half of the people are above it and half below it, regardless of the difference above or below. Why is this figure important? Because in the case of salary, for example, the average is an upwardly distorted figure. Here is an extreme example: if there are 10 people who earn a salary of NIS 10,000 a month and one more person who earns a salary of NIS 1 million a month, then the average salary of those 11 people will be….hold tight… 100,000 NIS a month. Obviously, this is an extreme case, but it illustrates that the average is very ‘sensitive’ to extremes. Another example: if the salary of that senior official is 100 thousand per month (which is already cases that exist in the economy) then the average salary is more than 18 thousand shekels per month. Even in this case the average figure is completely distorted (more on the distortions of the average – click here).
The median counteracts exactly these biases of the mean. In both cases – the median salary will be exactly 10 thousand shekels. The extreme figure is completely neutralized and does not distort the data. Of course, the median also has its own problems, so it is important to examine these two figures together.
Why are we telling you this? Because this is exactly what new data from the Bank of Israel revealed today – only the other way around. Along with the publication of the average interest rates, the Bank of Israel also began to publish the median interest rate and this makes it possible to check not only the average but also what the public really receives – that is, where you are in relation to what the bank offers at the extremes. The public took out loans in the amount of NIS 4.1 billion in January, but how many of them received loans at good interest rates and how many at high interest rates? In the case of the loans that the banks give to the public, the average interest rate is lower than the median interest rate. It basically tells you that there are people who receive interest favors more and therefore the average in this case – biased downwards. The Bank of Israel even alluded to this and stated today “Due to the fact that consumer loans have a large variation in the interest rates paid by customers, the publication was expanded so that information not only on the average interest rate but also the range of interest rates will be displayed. The interest rates offered to customers are affected by several parameters, among other things, the level of risk of the borrower , the amount of the loan and its terms”.
Who are the ones paying the better interest rates? (meaning the cheaper ones) Well – those whose wages are higher (and anyway less need these loans). Therefore, their bargaining power is higher than the ‘average person’ and they can get better payment interest rates from the banks. But most people – pay a higher interest rate than that average interest rate. As of January, the average interest rate in the banking system was 9% (before the Bank of Israel’s latest interest rate increase last week) – but the actual difference between the banks is large.
Here are the data of the major banks: Mizrahi and Poaleim stand out negatively. Leumi and Discount for good
How big is the gap? is very. The bank that leads the list ‘badly’ – to the detriment of the customers – is Mizrahi Tefahot Bank, where the average interest rate is 9.5% while the median interest rate is 13.5%, a gap of 4%. Bank Hapoalim is next in line among the big banks, with the average interest rate at 9.3%, while the median interest rate is at 11.85%, a difference of 2.55%. At the International Bank, the average interest rate is 7.8%, while the median is 9%, a difference of 1.2%.
On the other hand, there are also better banks – where the differences are much smaller, which means that your chances of paying an interest rate similar to the interest rates of the ‘privileged’ are better. At Bank Leumi the average interest rate is 9.3% while the median interest rate is 9.44% – in this case it is much more reasonable (a difference of only 0.14%). The situation is better at the Discount Bank as well. He takes an average interest rate of 7.5%, while the median interest rate is 7.8% (a difference of 0.3%).
In the small banks: caution – very high interest rate at the Bank of Jerusalem, One Zero provides a good result
The Bank of Jerusalem continues to stand out negatively in the high interest rates on the loans, much more than all the others when the average interest rate it gives on the loans is 15.5% while the median interest rate is 16.8%, a difference of 1.3% and this is beyond the interest rate itself which is high compared to others, and the truth – even higher than credit card companies.
And what about the new digital bank, One Zero? It stands out positively from the other side – it takes an average interest rate of 6.4% on average and the median interest rate is 6.45%, a difference of 0.45%, but even after these differences it is a significantly lower interest rate than the traditional banks. we loved
What are the best and worst interest rates you can pay to banks?
What else can be learned from the data? What are the ‘best’ interest rates that can be paid on bank loans and on the other hand – what are the most expensive interest rates, when above are shown the interest rates for the 25% of borrowers who are the most dangerous in the eyes of the bank and therefore the interest they are forced to pay is the highest, and on the other hand below are shown the best interest rates, for 25% of the best borrowers in Rai Bank.
Here it is:
You can see how in the Mizrahi, Hapoalim and Omi Banks the maximum interest rate (the most expensive) is 14.6% – 14.8%, in the Discount and International Banks the maximum interest rate is 12.3% – 12.4%, in the Bank of Jerusalem it is 18.7% while in One Zero it is 8.9%. On the other hand, the lowest interest rates (the best) are 6.1%-6.3% in actual and national rates. 7% in Mizrachi Tefahot, 6% in Discount, 5% in International, 12.7% in Bank of Jerusalem and 5.2% in One Zero.
Here is the data also in graphic form:
You can also see the gaps between the median interest rate and the average in the graphs: look at the graph of the median interest rate, and you will see how at Mizrahi Tefahot the blue dot is very close to the upper part, i.e. to the higher interest rates, as is the case at the Bank of Jerusalem. Whereas in Discount and One Zero it is close to the bottom – in other words, more people pay lower interest rates. Leumi is also in a relatively reasonable place.
On the other hand, look at how the graph of the average distorts the data – suddenly all interest rates in banks are supposedly lower. But it’s not real. You already understand that you will pay more.
The Bank of Israel wants the public to be aware of these disparities and points out that starting today “in addition to a simple comparison of the average interest rates charged by the various banks on total loans, a comparison of the median interest rate is also presented. The median interest rate will allow each consumer to better understand his position in relation to the other interest rates offered on loans to other consumers. The difference between the median interest rate and the average is that the average is affected by amounts (because it is weighted), while the median interest rate is not affected by the amount.”
Another important note that the Bank of Israel states is that “the interest on credit does not change significantly between the different loan periods” – that is, the interest you will pay will be similar whether you take a loan for a very short time or for a longer time.