Interest on mortgages in Israel has risen by about 1% during the last month and a half, since the global financial crisis became full-blown. The average interest on a 25-year loan is now 5.3%, linked to the consumer price index. Last month, the average interest on the same loan was 4.5%, according to the AMG Mortgages corporation.
"The spread on linked prime loans is now minus 0.7%," says AMG manager Amit Kaminsky. "That's an increase of 0.25% inside a few months."
If a mortgage is NIS 500,000, the monthly payments have increased by NIS 232, which translates to NIS 34,800 throughout the life of the mortgage, he explains.
Kaminsky also says Israeli banks have become more reluctant to issue loans. That, in turn, translates into a drop of about 4%. If banks had been prepared to lend 62% of an apartment's value, on average, that figure has now dropped to 58%. For an apartment costing a million shekels, the buyer will have to hand over NIS 40,000 more in his own money than a few months ago.
The reason for the jump in rates is the prevailing uncertainty: the global credit crunch has unnerved the local system too, Kaminsky says. "Banks charge an uncertainty premium equivalent to 0.25% to 0.4% (of the loan's value), which has sharply increased interest rates on loans."
However, Israel's banks have taken a step to prevent an increase to monthly interest payments by families, Kaminsky says, by extending the average term of the loan by 3.5 years.
Meanwhile, in another sign of the times, the First International Bank of Israel (Beinleumi) is raising its service fees, mainly for business customers.
However, on the flip side, Beinleumi lowered four of the fees that apply to household customers.
The increases to seven fees will apply from November 16. One fee that only kicks in from 2009 is rental of safety deposit boxes: the cost of that will rise by hundreds of shekels per year, the precise sum depending on the dimensions of the box.
However, more immediate increases include a fee applicable to businesses for allocating a foreign currency credit line that rose by 0.3% to 1.8% of the credit line.
Private customers will pay 0.18% instead of 0.15% for increasing their credit line.
The fees that Beinleumi are reducing include direct banking through SMS text messages (cellphone texting). Access to that service will cost NIS 9.90 a month instead of NIS 14.90. Another reduction will be for distribution of bank files by electronic means, email or disk, which will cost NIS 150 instead of NIS 250.
A third reduction will be for foreign currency transfers between clients of the bank, which will cost $10, instead of $25 at present.
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