Low Interest Rates Spur Mortgage Refinancing

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Construction in Tel Aviv.Credit: Eyal Toueg

Private households are taking advantage of Israel’s low interest rates by refinancing their mortgages, according to figures released by the Bank of Israel on Tuesday. Households refinanced a total of 11 billion shekels in mortgages in the 12 months preceding July, the bank stated.

July was the year’s strongest month for mortgages. Households refinanced some 1.08 billion in mortgages last month, compared to 900 million during an average month. Most people tend to refinance with the bank that gave them their original mortgage.

In total, some 22,600 households refinanced over the past year, out of a total of 760,000 with outstanding mortgages.

Households took out 4.99 billion shekels in new mortgages in July, versus a monthly average of 4.3 billion for the preceding 12 months.

Banking sector sources say August will not be an unusually strong month, with new mortgages expected to total only an estimated 4.2 billion to 4.4 billion shekels. Also, fewer people are inquiring regarding mortgages, which may be tied to the reduced number of home purchases as a whole.

Home prices are still climbing despite the government’s stated intentions to lower them, and even though fewer people are buying, according to figures released by the government appraiser on Monday.

If current trends don’t change, total new mortgage debt could start to decrease within a few months, say banking sector sources.

The average mortgage taken out in July was for 621,000 shekels, versus 598,000 shekels a year earlier, according to the central bank’s data. Investors accounted for 17% of all mortgages, up from 15% a year ago.

Households’ housing-related debt was 294.5 billion in July. Total household debt increased by 2.3 billion in July, or 0.6%, to a total of 419 billion, according to Bank of Israel data published on Tuesday.

Business-sector debt increased by 8 billion shekels, or 1%, to 777 billion shekels.

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