The high volume of mortgages taken continued in May. Banking sources estimated that mortgages totaled over NIS 5 billion, in line with the average over the past 12 months. Two years ago, NIS 5 billion in mortgages in one month would have been considered abnormally high, but it appears to be the new norm: the average monthly volume of mortgages over the past 12 months was NIS 5.3 billion.
One interesting point is that the spreads in the mortgage market have widened, although the interest rate has not risen. One of the reasons is that Bank Leumi (TASE: LUMI) and Bank Hapoalim (TASE: POLI) have decided to take their feet off the gas and transfer the focus in their growth in credit to other sectors, while the intense competition typical of this sector has eased. Although competition has receded somewhat and prices have risen, the public has not been deterred, and continues to buy housing and take mortgages.
Mortgage sector sources say that the public is not particularly impressed by Minister of Finance Moshe Kahlon's efforts to lower real estate prices. "The buyer fixed price plan has gotten underway, but the feeling among housing purchasers is that the plan may help people buying apartments through it, but will not affect the general price in the real estate market, certainly not in the foreseeable future," a senior banking source said.
Refinancing is over
Another interesting trend cited by the banks is a steep drop in the proportion of those refinancing mortgages. The banks say that while in the past, 20% of mortgages were refinancing of old mortgages, the proportion has now fallen to 7%.
The near-zero interest rate in recent years has made refinancing of mortgages attractive to many home buyers who took their original mortgages many years ago when the interest rate was higher. It appears, however, that refinancing has more or less exhausted itself. Anyone for whom refinancing is worthwhile has already done it, and the rise in prices is making refinancing less worthwhile, compared with the price several months ago.
It is important to emphasize in this context that despite the drop in the volume of refinancing mortgages, the total volume of mortgages has not fallen, which shows the power of the boom in real estate, in which the absolute majority of the NIS 5 billion in mortgages in May are the result of true real estate deals, not refinancing of old mortgages.
While the volume of refinancing mortgages is dropping, activity by investors in the market remains more or less the same, accounting for an estimated 15% of mortgages. The banks also note that the proportion of secondhand apartment deals has risen slightly at the expense of new housing purchases.
The banks' recent financial statements show a change in strategy at some of the banks with respect to mortgage business. Bank Leumi and Bank Hapoalim have downshifted, and have slowed the growth in their new mortgages. Smaller banks Israel Discount Bank (TASE: DSCT) and First International Bank of Israel (TASE: FTIN), on the other hand, regard this market as an opportunity, and have begun boosting their market shares. Mizrahi Tefahot Bank (TASE:MZTF) is maintaining its high growth rate in mortgages, and has consolidated its status at the leading entity in the market, with a growing gap between it and its competitors.
Published by Globes [online], Israel business news - www.globes-online.com - on May 31, 2016
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