Could the social protest have done in weeks what the Bank of Israel has been trying to do for more than a year?
The mortgage market cooled off considerably in September: The total number of new loans plummeted, the total value of loans dropped and the percentage of financing fell.
The only factor that could explain the drop is the protest over the cost of living - including housing prices - that broke out in July. All-time high prices in the housing market already had many buyers sitting on the fence. The only mortgage indicator that increased in September was the size of loans taken out by investors, and their share of new home purchases.
This is the first time the Bank of Israel has published such detailed data about the housing market. The central bank decided to tighten its oversight over banks and force them to publish monthly data on their mortgage operations starting in April.
According to the central bank's data, the country's banks issued an average of 7,583 mortgages every month between May and August. In September, the figure was 5,289, a drop of 30%.
The total volume of mortgages also dropped sharply, from an average of NIS 4.23 billion a month from May to August to NIS 3.03 billion in September. The trend continued in October, with another 22% drop, but that's due to the Jewish holidays.
The data on loan size indicates that banks have become a bit more cautious. The volume of large mortgages, meaning for a larger percentage of the asset's value (which are more risky for banks ), contracted more than that of small mortgages. The volume of loans worth 75% or more of the asset's value dropped 33% in September versus the May-August average, while the volume of loans for 30% to 75% of asset value dropped 30%, and that of loans for up to 30% declined only 23%.
Meanwhile, investors were responsible for an increasing portion of borrowing in September.
The size of the average loan was steady over the past several months, including September. Borrowers took out loans averaging NIS 559,000 in May through August, and the figure increased slightly - by 2% - to NIS 573 million in September.
Yet a breakdown of individual loans indicates that the slight increase in September was due to real estate investors.
While fewer loans for buying investment apartments were taken out in September, investors who did receive loans took out larger ones. More than 1,000 loans a month were issued to investors between May and August, while the figure for September was 734. However, while the average loan for real estate investment purposes averaged NIS 500,000 during the spring and summer months, it was NIS 612,000 in September - a 22% increase.
Meanwhile, the total value of new bank loans to investors has been growing steadily in percentage terms. In April, 10% of all money loaned was to investors, defined as people who already own at least one home. In May the figure was 11%, in June it was 12%, in July and August it was 13% and in September it was 15%.
There are several explanations for this - the social protest might have frightened homebuyers more than investors, who might have placed more value on interest rates than on the protest and its side effects. Another factor might be that banks are making it more difficult to borrow, at the urging of the Bank of Israel. This might be having more of an impact on homebuyers than on investors, since people who already own assets are approaching the bank from a better starting point and are likely to receive a more generous loan.
September's data indicates that more mortgages were taken out to buy particularly cheap homes. Some NIS 89 million in loans were taken out to buy homes worth less than NIS 400,000 in August; in September the figure was NIS 115 million - a 30% increase. Meanwhile, the total value of loans taken out to buy homes worth more than NIS 400,000 decreased 26% to 28% over that period.
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