Ceiling raised on variable rate mortgage component

Yair Avidan / Photo: Rami Zarniger , PR

Mortgage takers in Israel will now be permitted up to two thirds of their loan at a rate linked to the prime interest rate.

The Bank of Israel Supervisor of Banks Yair Avidan has announced that the restriction on the variable (prime-linked) interest rate component of mortgages is being eased. Until now mortgage takers were only permitted to take up to one-third of the mortgage with a variable interest rate linked to the prime-rate and two thirds at a fixed rate. Mortgage takers will now be permitted up to two thirds of their loan with a variable interest rate.

Avidan wrote, "Due to the conditions prevailing on the market we think it is right to remove the restriction on the prime rate in the mix of the mortgage, and thus ease the situation for those taking a loan, while maintaining the balance required for both the loan takers and the banking system."

Avidan says that the new instructions will increase options for mortgage takers. In effect taking a higher proportion of the vairable rate will lower the cost of the mortgage in the short term but raise risks for the medium to long term if interest rates were to rise significantly.  

Published by Globes, Israel business news - en.globes.co.il - on December 14, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Yair Avidan / Photo: Rami Zarniger , PR
Yair Avidan / Photo: Rami Zarniger , PR
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