The level of new mortgages granted in Israel continued to be low in May. According to Bank of Israel figures released yesterday, the total amount of mortgage loans granted last month was NIS 5.2 billion. The proportion accounted for by mortgages for homes purchased under the government's Buyer Price program reached a peak - almost 17% of the total. Another prominent feature is the continuing trend of deferral of mortgage payments. About a quarter of the total balance of mortgage debt has been deferred.
The amount of mortgages taken in May reflects the steep decline in activity in the real estate market during the coronavirus period. There was a slight rise in comparison with April, but whereas the lockdown was in full force in April, and the Passover holiday also fell in that month, in May the restrictions began to be lifted, so that the market might have been expected to be much more active. The mortgage figures indicate that activity remained much lower than it was before the pandemic broke out. The total for new mortgages in May is about 15% below the monthly average in the period before the coronavirus crisis, and is similar to the monthly level of new mortgages in 2018, which was an indifferent year in this respect.
The mortgage market is being buoyed up by Buyer Price purchasers. Before the coronavirus pandemic, their share of the market was 12-13%. Since it began, this has risen to 16-17%. This would appear to indicate that while in the open market people are exercising caution and preferring to hold back, purchasers under the subsidized program think that they have an unrepeatable opportunity for which it is worth taking a risk.
The most prominent phenomenon, however, is the substantial growth in the number of borrowers who decided to take advantage of the possibility set out by the Bank of Israel and to defer their mortgage payments. This applies to about a quarter of the total of mortgage loans outstanding - NIS 94.4 billion out of a total of NIS 380 billion.
People are evidently living in fear for their economic future and in uncertainty, and seek to cut expenditure as much as possible by deferring whatever they can. The figures are for May. The Bank of Israel's figures show, however, that whereas in the first two months of the pandemic in Israel (mid-March to mid-May) the number of households deferring mortgage payments reached 130,000, by the end of May the number grew by 7,000, meaning a substantial fall in the rate of deferrals. Senior managers at mortgage banks also told "Globes" that the rush to defer mortgage payments had calmed down a great deal recently.
An important test of the public mood will be the behavior of borrowers who at the end of March and the beginning of April requested repayment deferrals of three months. This period is about to expire, and the big question is how many of them will seek to extend the deferral by a further three months, as the Bank of Israel allows, and how many will prefer to go back to paying off their mortgages as normal.
Published by Globes, Israel business news - en.globes.co.il - on June 24, 2020
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