Israel Discount Bank (TASE: DSCT) subsidiary Discount Mortgage Bank Ltd. published its financial report for the second quarter of 2011 today. Israel's fourth largest mortgage bank, with an 8% market share, has a credit portfolio of NIS 17.2 billion, 5% more than at the end of 2010. New credit in the first half fell to NIS 1.9 billion from NIS 2 billion in the corresponding half.
Although the financial report covers the first half of the year, Discount Mortgage Bank CEO Etti Langerman is more worried about the current situation. "The market is going down," she told "Globes". "We're feeling this much more in August than in July. Leads, i.e. new people interested in mortgages, have fallen 30% in August. We're feeling a complete stop throughout the market. People who were already in the loan process are now sitting on the fence."
"Globes": Why is this happening?
Langerman: "The social unrest is having an effect. People are waiting to see where things are headed and the decisions that the government will have to take."
What will happen if home prices fall?
"A fall in home prices will affect people's sense of wealth, but not a person who owns an apartment and lives in it. The important thing is the ability to repay the mortgage. At the current unemployment rate, there is good repayment ability, and there is no economic problem. If there is a slowdown and a rise in unemployment, that will affect the public. I want to emphasize that, at the moment, we don’t see a worsening in the parameters, and there is no increase in standing orders not being honored."
Discount Mortgage Bank's net profit rose to NIS 11.4 million for the second quarter from NIS 9.8 million for the corresponding quarter. First half net profit rose 27% from the corresponding half to NIS 20.3 million. The financing spread rose 19% to NIS 68 million.
In compliance with the Bank of Israel's disclosure requirements, Discount Mortgage Bank details its mortgage credit structure. The figures show that the average mortgage rose from NIS 673,000 in 2010 to NIS 685,000 in the first half of 2011. The average loan-to-value (LTV) ratio was 60%. 21% of loans have an LTV of 60-75%, and 12% of loans (NIS 202 million) have an LTV of over 75%. Most loans with an LTV of over 75% were granted with the help of mortgage insurer EMI Ltd.
The repayment ability item (the ratio between the monthly repayment on a loan and the mortgage holder's disposable income) was up to 30% on 69.3% of loans granted since 2008. The ratio was 30-40% on 18.7% of loans, and it was over 40% on 12% of loans.
Published by Globes [online], Israel business news - www.globes-online.com - on August 18, 2011
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