The volume of mortgage loans increased in November from October after five months of decline, Bank of Israel figures released yesterday show.
Mortgage lending by banks surged 22% to NIS 2.87 billion, but it remains 30% below the figure for July, when the protests over the cost of living began. Among the social ills highlighted by the tent protesters was housing prices, which the government under Benjamin Netanyahu has vowed to address. Whether because people hope housing prices will pull back or for reasons of economic insecurity, housing sales have been slow since the summer.
The November figures better reflect the state of the housing market than the data for October, says David Meizlik, head of Mercantile Discount Bank's mortgages department. "October was a month of holidays, when a lot of people at the banks are on vacation, as is everyone else - at the Land Registry , the Registrar of Mortgages and so on."
Not only did loan volumes rebound powerfully in November, there was a 16% month-on-month increase in mortgages bearing fixed, unlinked interest, while all other structures decreased.
The increase in unlinked loans bearing fixed interest happened for two reasons. The Bank of Israel made loans with big floating-rate components more expensive for both the lender and the borrower. Also, the public is shying away from loans linked to the consumer price index.
That's nothing new: Israelis have loathed loans linked to the CPI ever since the horrible days of hyperinflation in the 1980s, Meizlik says. In recent years, borrowers tended to choose mortgage structures that had a floating rate but weren't linked. But the Bank of Israel has shut down that avenue, he adds.
Unlinked mortgages bearing fixed interest are a relatively new animal. Even after the November increase, they constitute only 9% of all mortgage lending, up from 5% in July.
The banks first offered them in 2005. Their main advantage is that the monthly payment is flat, not changing with interest rates or inflation. The main disadvantage is that they're expensive, incorporating inflation expectations and the risk of interest hikes.
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