Home News Borrowing for home purchases continues freefall amid higher rates, prices

Borrowing for home purchases continues freefall amid higher rates, prices

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Mortgage borrowing fell by more than 20% from August to September, the Bank of Israel said this week, to its lowest level since September 2021.

Mortgages this month reached nearly NIS 7.7 billion ($2.2 billion), compared with NIS 9.6 billion ($2.7 billion) in August, marking the fourth straight month of declining borrowing.

Lending hit a record NIS 13.4 billion ($3.8 billion) in March, but apart from a slight recovery in May, it has been steadily declining since as interest rates rose to keep inflation in check. increase.

When House prices continue to rise exponentiallyand because individual mortgages are likely to be higher, the figures show that fewer Israelis are buying or renting homes.

The majority of mortgage loans have variable interest rates, fluctuating at interest rate levels set by the Bank of Israel.

Banks sharply increased interest rates from 0.1% to 2.75% from April, exposing borrowers to higher monthly payments. Interest rates are expected to continue rising to manage inflation and are now at 4.6%, above the bank’s 3% ceiling target.

New mortgages should not exceed 30% of monthly net household income, so rising borrowing costs are a barrier to obtaining the level of mortgage needed to buy property. The best deals available for new mortgages are getting more and more expensive, from 3.9% to 6.5%. According to First Israel Mortgages.

Mortgage rates remained stable at 1.75% for several years until the end of March.

Other credit related to home purchases, excluding loans, is also at NIS 331 million, down 21% from the August figure, at its lowest level since the end of 2020.

Knesset member Michael Bitton led a call for the 75% limit on loan amounts in the mortgage market to be eased, encouraging homebuyers to borrow more to cover the borrowings needed to purchase a property. , claimed to be forced to take out additional, more expensive side loans.

Interest rates in Israel many other countries. In the United States, where inflation is over 8%, the current inflation rate is 3.5%. 3.6% in China. 3.25% in Canada. In South Africa it is 6.25%.

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