Mortgage rates have never been lower, but home buyers haven't exactly risen to the bait. The 0.25% July cut in the Bank of Israel rate, announced in June, dragged interest down on all types of mortgage loans across the board - fixed rate and variable rate loans equally - to a new low, according to figures released last week by the Bank of Israel. Interest charged on unlinked fixed rate loans have fallen to just 5.00%.
But the volume of mortgages taken by the public last month, expected to rise, actually declined to NIS 3.94 billion - 4% less than in May. The monthly figure is relatively higher that at the end of 2011 and beginning of 2012, but home buyers still seem to be holding back. Signs of weakness in the Israeli economy, especially in the labor market, along with warnings from Bank of Israel governor Stanley Fischer on the possibility of a meltdown in Europe and the potential implications for the local economy, have held demand in check.
The market for new mortgages dropped off sharply in the wake of last year's cost-of-living protests, not fully recovering until May when buyers and investors who had been sitting on the fence for months decided it was high time to re-enter the market, taking advantage of bargains and the lower rates. New mortgages for the first half of the year totaled NIS 20.5 billion.