Israel's Mortgage Mania Continues in July

Figure reached $1.4 billion and will probably show growth for August.

Michael Rochvarger
Guy Erez
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Apartments near the Chords Bridge in Jerusalem. Credit: Tal Cohen
Michael Rochvarger
Guy Erez

There was little sign in July that Israel’s mortgage mania was calming down after the Bank of Israel reported Wednesday that borrowers took out 5.4 billion shekels ($1.4 billion) in new home loans during the month.

That was down from 5.57 billion shekels for June but was still the second-highest monthly total for the year. Banking sources said they expected that August would show the borrowing had not let up and would reach between 5.5 billion and 6 billion shekels, 8% or so higher than the average of the last 12 months.

On the other hand, the number of mortgages taken out dropped 19% from a year ago to 8,041. Bankers said Wednesday that foreign residents were driving the market right now as were borrowers from the ultra-Orthodox and Arab sectors.

Finance Minister Moshe Kahlon has been struggling to rein in home prices, devising a plan to impose taxes on home investors, but he has yet to post a clear victory. While the Central Bureau of Statistics reported that prices fell 1.3% in the second quarter from the previous three months, the government assessor, using different criteria, said they rose 2.5%.

Israeli banks have granted as much as 45 billion shekels in mortgages so far this year and expect the figure to reach 60 billion shekels. The Bank of Israel, which has sought to discourage borrowing, has warned that the banks may be too exposed to a downturn in the economy on home prices.