The Bank of Israel announced today that it is instructing the banks to present mortgage takers with three uniform options. In this way, the Bank of Israel hopes to reduce the confusion for mortgage takers by compelling all banks to offer the same three interest rate tracks. This reform will also provide more transparency and make it easier for mortgage takers to compare the mortgages being offered by the different banks.
The three tracks are: 1) 100% fixed interest unlinked; 2) one third fixed interest unlinked, one third variable interest linked and one third linked to the prime interest rate; and 3) 50% fixed interest unlinked and 50% linked to the prime interest rate.
The Bank of Israel presented these compulsory new tracks to the CEOs of the country's major banks during a video conference called to discuss the rise in risk of the bank's real estate credit portfolios. The Bank of Israel's concern follows the rise in mortgage taking with high rates of leverage of 60- 75% of the value of the property.
The data about the rise in risk in the real estate credit portfolios of the banks were contained in the Bank of Israel's survey of the banking system for the first half of 2021, which was published last week. The meeting with the bank CEOs today, in which Bank of Israel Governor Prof. Amir Yaron and Supervisor of Banks Yair Avidan participated, also stressed the risks and the need to remove the confusion confronting mortgage takers by offering only the three aforementioned tracks.
Published by Globes, Israel business news - en.globes.co.il - on November 14, 2021.
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