Mortgages Climbed by 4.4% in October

Figures from the central bank shows that Israelis were flocking to the banks in search of mortgages in the weeks before BOI imposed new limits on home loans.

In the weeks before the Bank of Israel imposed new limits on home loans at the end of October, Israelis were flocking to the banks in search of mortgages.

Figures from the central bank released on Monday showed the public took out NIS 3.38 billion in new mortgages in October, a 4.4% increase from the month before.

Most of that increase came before David Zaken, banks supervisor at the Bank of Israel, slapped on new restrictions on home lands at the end of last month, but bankers told TheMarker yesterday that the rate of applications for home loans had grown in the first weeks of November, apparently because the central bank lowered lending rates at the same time it was toughening mortgage standards.

Home buyers may have lined up at the banks to secure a mortgage before the new rules went into effect. The new standards announced by Zaken did not apply to home buyers who had already begun the process of taking out a mortgage.

The new rules imposed by the Banks Supervisor limits banks offering mortgages to a maximum of 75% of the home's worth (loan-to-value ). People buying second homes as an investment now face even tougher limits of 50%, while people upgrading to a better property are limited to loans equal to 70% of the house's value.

But the central bank also lowered its base lending rate by 0.25 percentage points to 2% effective in November, which lowered the cost of borrowing.

The October increase in new mortgages was 43% from a year earlier, but October 2011 was not representative of the trend because it came on the heels of the summer social justice protests that had deterred home buyers.

In August 2011, in the shadow of the protests, the value of new mortgages reached what was then a record NIS 3.95 billion, but in the following months the level dropped precipitously - to NIS 2.37 billion two months later.

In August 2012, a new record was set when borrowers took out NIS 5.8 billion in mortgages.

Ofer Vaknin