The mortgage market has contracted. The total volume of mortgages (state and bank funds, excluding internal movements) totaled NIS 6.9 billion in the first quarter of 2008, 8.5% less than the NIS 7.53 billion in the fourth quarter of 2007, figures released by the Bank of Israel reveal.. The rate of loans granted remained even throughout the quarter, with NIS 2.35 billion granted in mortgages in March alone. Beginning this month, loans to homebuyers qualifying for benefit from the Ministry of Housing will be paid out of bank rather than state funds.
The figures also reveal that Mizrahi Tefahot Bank (TASE:MZTF), the bank with the largest market share, increased its share of the market. The bank had a 29.1% market share in 2007, and increased this to 33.7% in the first quarter of 2008. Mizrahi Tefahot granted NIS 2.32 billion in loans in the quarter, 9.1% more than in the corresponding quarter in 2007.
The mortgage market has been engaged in a price war since last summer, as a direct consequence of the mortgage subsidies offered by Israel Discount Bank (TASE: DSCT). Discount Bank has promoted the concept that a mortgage is a loss leader, an anchor product designed to bring in customers and retain them, and not a source of profit for the bank, and undertook to offer the lowest prices on the market. Discount Bank doubled its market share as a result of this, forcing other banks to respond in kind and cut their own interest charges.
Published by Globes [online], Israel business news - www.globes-online.com - on May 1, 2008
© Copyright of Globes Publisher Itonut (1983) Ltd. 2008