Israeli Antirust Authorities Probing Possible Collusion on Mortgage Rates

Commissioner Michal Halperin warns banks of ‘tough action’ if investigation yields evidence.

Michael Rochvarger
Michael Rochvarger
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Israel's Antitrust Commissioner Michal Halperin at the Knesset Finance Committee
Israel's Antitrust Commissioner Michal Halperin at the Knesset Finance CommitteeCredit: Olivier Fitoussi
Michael Rochvarger
Michael Rochvarger

Israel’s Antitrust Authority has begun investigating for any evidence of collusion among the country’s mortgage lenders and warned that it would take “tough action” if it uncovered evidence, its chief said on Monday.

Speaking to the Knesset Finance Committee, which held a debate on rising home-loan rates, Antitrust Commissioner Michal Halperin said the probe had begun last Thursday when it received the first usable data.

“We are talking about a complicated economic study that will take several weeks at least. If we indeed find there’s been collusion we will take steps against the banks,” she said.

Halperin said the authority’s suspicions were first aroused in July 2015 when mortgage rates began rising from record lows, but it hasn’t been clear so far whether the banks were in fact colluding to raise rates or were simply responding to Bank of Israel rules on home loans.

Halperin’s remarks came as Mizrahi Tefahot Bank, Israel’s biggest mortgage lender, reported Monday an 18% rise in third-quarter profit, far higher than what analysts had forecast. The bank’s net profit was a record 373 million shekels ($97 million), up from 316 million a year earlier and 342 million shekels, a poll of analysts by Reuters showed.

Mizrahi, which controls more than a third of the mortgage market, saw credit to the public grow 6.7% in the three months from a year earlier, to 168.6 billion shekels. The biggest increase was lending to households, which grew 9%, and to medium-sized business, which grew 10.6%, the bank said.

Figures released by the Bank of Israel earlier this month showed that mortgage rates had risen 0.2 percentage point in September on average. Mortgage rates not linked to the inflation rate rose between 0.15 and 0.17 points and crossed the 3% mark for the first time in a long time. Over the past year rates have risen by about 25% to an average of 3.07% in September, while inflation-linked loan costs have risen 40% to 3.45% on average.

Since the beginning of the year, the monthly mortgage payment has risen by 320 shekels ($83) a month on a 25-year 900,000 shekel mortgage, according to the mortgage consulting firm AMG.

Concerns about rising mortgage rates comes as the government seeks to contain sharp rises in home prices that began in 2008 and so far have shown little sign of letting up. However, on Sunday, sales of new homes had dropped 8.3% in the first nine months of the year, compared with the same time in 2015 when they reached a record.

Meanwhile, Bank of Israel Governor Karnit Flug told the panel that despite a doubling in housing prices the past decade, the “situation is not unique to Israel.”

Very low interest rates and cheap mortgages helped fuel strong demand for housing, but mortgage rates have been rising in 2016.

“It is important to remember that the interest rate on mortgages is also influenced by long-term yields in the bond market, the banks’ risk assessments regarding the housing credit market and other things,” Flug said. “As a result, we have seen some increase in the mortgage interest rates in the past year.”

Since July, Israel’s government benchmark 10-year yield has risen about 50 basis points to 2.08%.

Reuters contributed to this report

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