While this was expected, tens of thousands of Israelis will soon feel the rise in interest rates on their next mortgage payments. The Bank of Israel raised the interest rate by 0.25% today (Monday) and the mortgage prime route will increase accordingly from the next payment.
According to a calculation made by the Association of Mortgage Advisers, for her average mortgage with NIS 400,000 in the prime track, this is an increase of NIS 45 per month. Those who took out a 20-year mortgage will pay NIS 450.6 thousand for this route over the period, almost NIS 11,000 more than before the interest rate increase.
For those who have taken out a mortgage for longer periods, the price increase will of course be more significant. For example, in her 25-year mortgage, the price increase will already be NIS 13.8 thousand, and those who took it for 30 years will pay almost NIS 17,000 more.
“The expectation is that banks will make it easier for mortgage takers”
“The significant issue in the governor’s announcement is the fact that this is only the first increase in the Bank of Israel’s new plan to reduce monetary policy,” the Association of Mortgage Advisers said. “In other words, we expect more interest rate increases later this year, which will increase the monthly repayment of households by hundreds of shekels per month, and will significantly burden households.”
The association noted that in recent years, the cheaper the market interest rate, the higher the banks’ mortgage margins. “The expectation is that as interest rates rise, banks will return to the margins that were in previous years and make it easier for mortgage takers,” they noted.
As illustrated by Globes, the rise in mortgage interest rates does not only amount to prime interest rates, and that all mortgage routes have risen significantly in recent times, so new mortgage takers are expected to pay a significantly higher repayment in advance than the market was used to.
The banking system confirms that interest rates on the unlinked fixed tracks (KLT) have risen in recent months from the 3% range to about 4% on average.
At the same time, there was an increase of about 0.5% in interest rates also in the long-term variable tracks, those linked to the indices. According to a calculation made by Meir Wieder, CEO of Wieder Mortgages, “In the tracks with the variable interest rates, the interest rate rose from around 1.7% -1.8% to 2.3%. In the prime tracks, the interest rate rose from a prime minus 0.6% -0.7% (about 1%) to a prime minus 0.2% (1.4%). ” Bank of Israel, the prime route will hardly be expensive.
“The next step will be to examine the effect of rising interest rates on housing prices in Israel. For a long time, the Bank of Israel has argued that one of the main reasons for the high prices is low interest rates, and now this theory will stand the test,” the Mortgage Advisors Association noted.