Israel’s mortgages market remained strong last month as homebuyers took mortgages totaling NIS 8.4 billion in August, the Bank of Israel reports. Mortgage taking last month was 7% down on July when more than NIS 9 billion in mortgages was taken but was 20% higher than August 2023.
Concern about inflation affects the type of mortgages taken, with a historic low of only 23% of mortgages linked to the Consumer Price Index (CPI), compared with 33% eighteen months ago.
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The average interest on CPI-linked mortgages is 3.3% compared with the average interest rate of 4.9% on unlinked mortgages.
Record balloon loans
Short-term balloon loans taken by contractors continues to reach record amounts. These are bridging loans that leverage the popular financing deals, in which apartments are purchased with a particularly low equity payment at the time of signing the contract (just 5% to 20%), and the balance is paid only at the time of occupancy, when the apartment is built. According to the data, in August NIS 1.4 billion was taken in such loans. In August 2023 balloon loans were significantly lower totaling NIS 629 million.
The Bank of Israel has previously warned of the risks in this activity, among other things in cases where the buyers would not be able to meet the high payments following occupancy, and also due to the liquidity risk for the companies, which report high revenue without actually “seeing” the money for a long time.
Published by Globes, Israel business news – en.globes.co.il – on September 10, 2024.
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