Risk Rises in July Mortgages

Israeli borrowers show preference for variable rate mortgages.

Nathan Sheva
Nimrod Bousso
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Nathan Sheva
Nimrod Bousso

Not only is mortgage lending growing, but borrowers are taking on more risk, according to figures released Tuesday by the Bank of Israel.

The central bank reported that in July, when the value of new home loans jumped 25% from the month before, 40% of mortgages covered more than 60% of the home's worth. In addition, only half of borrowers were dedicating 30% of their monthly income or less to repaying their home loans - less than the usual rate.

The Bank of Israel had reported earlier that the value of new mortgages climbed to NIS 4.92 billion in July amid signs that the housing market is aboil again, after several months of declining prices and activity. On Monday, the central bank cited concerns about its decision not to lower its base lending rate for September, despite signs of a slowing economy.

In addition, the Bank of Israel reported that borrowers were showing a preference for variable rate mortgages, with the value of the category surpassing NIS 2 billion in July. The percentage of variable rate loans stood at 43% for the month, down from 41% in June, according to the bank. The number of investors - as opposed to people residing in the homes - rose to 13.5% of the total from 12.5% in June.

However, there was some encouraging data from the Central Bureau of Statistics yesterday, which reported that the pace of new-home sales edged lower in July from June. It reported that 1,930 units were sold last month, down 1.5% from 1,960, although up by more than 25% from a year ago.

For the first seven months of the year, new-home sales were down 2% from the same time in 2011.

Credit: Marina Zlochin

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