Israelis recycled some 2.67 billion shekels ($700 million) of mortgages in June alone as the cost of borrowing has plummeted amid record-low interest rates, the Bank of Israel said on Thursday.
The figure was 2.8-times the value of home loans that were traded in for new, lower-cost ones. The public has become more aware of the savings they can accrue from recycling mortgages, especially as independent mortgage consultants have launched advertising and marketing campaigns.
Recycling a mortgage often involves one-time fees for early redemption, but with the Bank of Israel’s base lending rate at just 0.1%, the savings on the lower interest of a new loan more than compensate.
The Bank of Israel said that three-quarters of the recycled mortgages were done in June through the same bank as the borrower’s previous loan. Another 16% changed banks along with mortgages and another 8% were holding a mortgage through the Housing and Construction Ministry and had now decided to take out a cheaper bank mortgage.
The pace of new mortgages continued unabated in June, with a record 7 billion shekels in new home loans taken out, the central bank reported earlier this month.
On Thursday, the bank added more details to the flood tide of home loans, which showed among other things that property investors were scaling back and accounted for only 15% of the borrowing, down 1.7 percentage points from the monthly average over the previous year.
The Finance Ministry has been trying to cool Israel’s overheated housing market by raising taxes on taxes for residential real estate investors. In the run-up to the higher taxes, however, there was a surge of investor buying, which will probably turn up in mortgage-borrowing figures for July and August.
The Bank of Israel said the average mortgage repayment in June took 25.7% of the borrower’s monthly household income. That was an improvement over 27.2% a year ago, probably due to lower interest costs
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