Competition Authority: “In the world of mortgages, banks are less hungry and competitive”

by time news

“The prevailing perception is that the mortgage market is a competitive market relative to other products the customer takes from his home bank. This perception stems from the unique characteristics of the mortgage market and especially from the fact that it is a freak product that can be taken relatively easily compared to other products. This is what the acting commissioner, Adv. Michal Cohen, said this morning (Sunday) during a discussion in the Knesset’s Economics Committee on the mortgage market.

Currently, the main players in the mortgage market are the banks, although there are another 15 entities operating in the market that can provide housing loans. Thus, the five banking groups hold 95% of the mortgage market and the three largest groups – Mizrahi Bank , The workers andnational 80%. “Banks are less hungry and less competitive and the three largest banks in the field are more working to maintain the situation than to increase competition. For example, there is evidence of long and unreasonable waiting times for price and appointment appointments. Banks focus on lending to their customers and not other banks. This is an understanding within the banks themselves.” , Said Adv. Cohen.

At this point, MK Shlomo Krei noted that there is a practice in banks to offer mortgage applicants better terms subject to the transfer of their account to the bank offering the mortgage. The competition commissioner noted in response that “this should be thoroughly examined before embarking on a legislative process.”

The Supervisor of Banks, Yair Avidan, who was present at the meeting, said that “at the end of the day in banking, the basic thing is that there is a connection between the commitment and the customer’s revenue. The unloading of products is not trivial “The logic is that in the largest household transaction, the bank will also want to see the rest of the customer’s activity and see profitability as a big basket. The word conditioning is strong, but it is possible that the more you transfer the customer’s activity to you, the better you will know it.”

READ Also:  Tesla and the power of vision: what is lacking in (Italian) politics

Adv. Cohen: “I think that before such things are forbidden, a deeper examination and thought should be done and at the moment we do not have a clear position on this matter. I’m just saying that what I mentioned earlier are signs of an insufficiently competitive market. We all know that the demand for mortgages is growing but on the supply side, the players are the same players and the costs of the banks in providing mortgages have risen in recent years due to regulatory requirements. “In most markets, such high demand means that new players want to enter and existing players want to increase their market share.”

“People act blindly”

In his opening remarks, the chairman of the committee said that in the mortgage market, the situation today is “terrible and awful.”

“There is no competition, no method and no simplicity. People operate in fog, blindly, and no mortgages can be compared to each other. Financial knowledge is reserved for its owners,” MK Bitton said. Avidan said in response that This is one of the markets that has differences between the market share in mortgages and the share in the current account and deposits.

During his review of the mortgage market, the Supervisor of Banks referred to an increase in the volume of mortgages from NIS 6.5 billion a year ago to NIS 11.5 billion in recent months, and to the claim that abolishing the one-third limit on prime interest rates and raising the limit to two-thirds led to higher prices and mortgage volumes.

“In the housing market there are aspects of demand as well as supply. The main component that explains the rise in prices is supply. It is not the role of the Supervisor of Banks to solve supply. Releasing the prime limit, we thought it was a very important consumer move. “We have worked to lower the risk of mortgage takers. I want to say most clearly that the very decline in the release of the prime limit is not the one that gives rise in housing prices but it has helped consumers deal with it, and without it it would have been much harder for consumers,” Avidan said.

READ Also:  State labor court clears the way for works council at Gorillas

He also addressed the characteristics of the new mortgages. “We see that more loans are taken between 60% and 75% of the property and that means that the apparent level of risk is higher, but the level of risk is still lower than in the world. “In the level of a representative loan we were in 2020 at the level of NIS 4,200 per month, and today we are at the same level we were before the release of the prime limit. True, this comes after there was a decrease of about NIS 200 per month.” Explained the Supervisor of Banks.

The regulation of the mortgage reform has begun

Regarding the quality of residential credit the credit rate is impaired is at a very low level. The history of damage from credit to housing is not high. So the mortgage property allows for a relatively risk-free loan. In 2020 there was an increase in provisions for credit losses due to the corona but the vast majority of deferrals returned to pay.

Regarding the reform announced last week by the Supervisor of Banks, which will oblige the banks to offer three uniform mortgage routes, Avidan said that the supervision begins with the settlement process. “The draft banking procedure has been sent to the banking system. There is a committee that will convene in about two weeks and we will receive the comments of the banking system, then we will pass them to the advisory committee and then to public comments. There is room for a re-examination of the baskets, “Avidan noted.

READ Also:  The government will introduce temporary export duties on metals

According to Eitan Madmon, CEO of the Association of Banks, there is already competition in the market, including a significant drop in interest rates – and this has been determined in the past in a number of professional reports. This is the most open market for competition and falling prices, the indices set by the Competition Authority are extremely stringent, and over 80% of customers receive offers from several banks.

You may also like

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.