Homes in Kafr Kara.
Homes in Kafr Kara. Photo by Kobi Peled
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The value of new mortgages continued to break records in August, with some NIS 5.8 billion in new home loans taken out that month, the Bank of Israel said on Thursday.

The figures represented a 17% increase from the month before and a 71% jump from the monthly average over the last 12 months, the bank said. The figures heighten concerns that the housing market is heating up after a brief period in late 2011 and early 2012 when demand and prices cooled.

The Bank of Israel data also showed that borrowers were changing their mortgage preferences, with a big increase in demand for home loans not linked to the consumer price index. That type of loan doubled from its monthly average over the last year to NIS 2.4 billion in August. That was equal to 42% of the total, up from about a third in August 2011.

By comparison, inflation-indexed mortgages grew by about 57% in August from the monthly average and foreign currency-linked loans by 38%.

The growing preference for nonlinked mortgages makes sense in light of recent inflation data. The August CPI jumped 1%, higher than economists had predicted, and it is expected to remain at a high 0.6% to 0.7% in September due to rises in the value added tax and fuel prices..

Despite the increased demand for unlinked mortgages, the average rate of variable interest loans didn't move much: It was 3.38% in August compared with 3.29% the month before. The average term of a home loan rose slightly to 20.6 years. For fixed-rate home loans, the average interest rate fell to 4.63% from 4.84%