Mortgage Activity in Israel Still Strong, Bankers Say

2016 likely to see $16 billion in new combined lending, about the same as in 2015.

Michael Rochvarger
Michael Rochvarger
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Over the last decade the banks’ combined mortgage portfolio has grown by NIS 135 billion, an increase of 125%.
Over the last decade the banks’ combined mortgage portfolio has grown by NIS 135 billion, an increase of 125%.Credit: Getty Images
Michael Rochvarger
Michael Rochvarger

Even as interest rates rise, Israel’s mortgage market is showing few signs of letting up, with bankers estimating that 2016 will end with combined lending of 60 billion shekels ($16 billion), about the same as in 2015.

Borrowers are expected to take out about 5.5 billion shekels in home loans this month, adding to the 47 billion shekels they took out in the first eight months of the year and about 300 million shekels more than the monthly average over the last year.

The market has gotten a boost since June, when Harel Insurance & Finance teamed up with Bank Leumi to offer some 8 billion shekels in mortgages over 2016-17.

“The mortgage market is alive and kicking,” said one senior banker, who asked not to be identified.

“We aren’t detecting any real signs of home prices declining. Until we see a major increase in the inventory of home construction and foreign building companies are working here on a large scale, there won’t be any serious change in the mortgage market.”

The government has invited a limited number of foreign builders to operate in Israel in the hope they will introduce new techniques and speed up construction.

The banker expressed skepticism about Finance Minster Moshe Kahlon’s plan to tax people owning three or more residential properties, in the hope of discouraging investors from crowding the market. The banker said the investors he has spoken to are skeptical the tax will win Knesset approval and, if it does, they will find ways of evading it.

“The market is bringing together different kinds of buyers — investors who are buying because they don’t have an alternative; young couples, many of whom don’t want to keep paying high rent; and people moving to bigger homes for whom buying is a necessity,” said another banks. “For now, demand is exceeding supply.”

The banks themselves are taking different strategies. The two biggest, Bank Hapoalim and Bank Leumi, have scaled back their mortgage lending while smaller lenders Israel Discount bank and First International Bank of Israel have stepped up activity. If margins in mortgages are not that high, the volume of business makes up for that, bankers say.

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