Bank of Israel figures show that mortgage interest rates are still climbing. In November, the average interest rate on index-linked mortgages rose from 3.53% in the preceding month to 3.67%, by 1.1% over the past year, and by 1.7% over the past 18 months.
The interest rate on the most popular mortgages of 15-20 years rose to 3.93%, compared with 3.81% in the preceding month, while the interest rate on 20-25-year mortgages rose from 3.90% to 4.02%. The increase in mortgage interest rates encompassed both short and long-term mortgages.
The interest rate on unlinked mortgages also rose in November, although more moderately. The average shekel-denominated interest rate rose from 3.13% in the preceding month to 3.19%. The shekel-denominated interest rate has gone up 0.70% over the past year.
The shekel interest rate climbed from 4.31% in the preceding month to 4.42% on 15-20-year mortgages and from 4.59% in the preceding month to 4.66% on 20-25-year mortgages.
The rise in the mortgage interest rate is attributed mainly to a decline in competition between the banks. The mortgage banks are lowering their exposure to mortgages by selling mortgage portfolios to investment institutions, and are not fighting over every customer. They are not lowering the interest rate dramatically, even when this means that the customer will take a mortgage from another bank.
Higher mortgage interest rates mean a rise in the cost of housing. A 1% change in the rate makes a housing unit (for buyers with an average mortgage) 2-3% more expensive.
Antitrust Authority director general Adv. Michal Halperin yesterday revealed in a Knesset Finance Committee session that she had begun to examine the mortgage banks' policy, and whether they had acted as a coordinated group in raising mortgage interest rates. "If, heaven forbid, we find collusion, we will address it," Halperin said.
Finance Committee members today expressed great dissatisfaction with mortgage interest rates, complaining that the Governor of the Bank of Israel had not provided answers and solutions to the problem. MK Orly Levy-Abekasis (Yisrael Beitenu) said," Young people have lost an aggregate NIS 5 billion to the banks over the past year because of the measures taken by the Bank of Israel."
Published by Globes [online], Israel business news - www.globes-online.com - on November 15, 2016
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