Israelis are replacing higher-rate mortgages for lower-rate ones as interest rates touch historic lows, figures released by the Bank of Israel on Tuesday showed.
In March, 4,777 borrowers repaid mortgages valued at a combined 1.77 billion shekels ($460 million), up 48% from 1,792 loans totaling 923 million shekels a year earlier.
With the Bank of Israel’s key lending rate at a record low 0.1%, the savings from “recycling” an old mortgage encouraged even borrowers with little outstanding debt made the move. The average loan recycled in March was 371,000 shekels, down from about 500,000 a year earlier.
Bankers say savings depend on the amount and duration of the loan and the rate differential but can reach tens of thousands of shekels. Low rates and borrowers choosing longer repayment periods caused the average repayment to drop to 25.5% of monthly income, down from 27.3% a year ago.
To save fees and red tape, 89% refinance at the same bank as the previous mortgage, the Bank of Israel said.
A total of 773,000 Israelis have mortgages, on which they owe 267.5 billion shekels. Despite rising home prices and concern about borrowers’ ability to repay, only 0.8% are in arrears — defined by the central bank as more than 90 pays due.
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