The second-hand housing market is awakening due to the Bank of Israel’s temporary directive limiting balloon/bullet loans and contractor loans. In the coming months, we are expected to see a decline in mortgage volumes, reflecting the decrease in first-quarter transactions alongside the offset of previous performances.
In response to the Bank of Israel’s mortgage report for August, the association explains that the high mortgage volumes published in the latest Bank of Israel report reflect the completion of first-hand transactions and the realization of second-hand deals.
The report shows that in August, mortgages totaling 9.1 billion NIS were taken out, a decrease of 15% compared to July. Balloon loans (including contractor loans) amounted to NIS 1.28 billion, or 14% of all mortgages, representing a 15% decline compared to July.
The association emphasizes that "the latest data illustrates how much households in Israel are struggling to cope with housing costs, due to high prices, a heavy interest rate environment, and an increase in mortgages at risk."
The association further notes that the market has already priced in an interest rate cut in the coming months, a move expected to ease monthly repayments for existing borrowers. They believe that the start of an interest rate reduction and the moderation of inflation could provide greater relief to borrowers.
Additionally, the association points out that the demand for loans for any purpose (this month 571 million NIS), mainly for loan consolidation and reducing monthly payments, continues even now, two years after the outbreak of the war: "Many households experienced a sharp increase in monthly repayments on retail loans and are forced to refinance their debts through property collateral and extend repayment periods."
In light of this need, the association once again calls for the temporary directive allowing loans for any purpose, set to expire at the end of 2025, to be made permanent.
Shalom Amoyal, Mortgage System Manager at Bank of Jerusalem: Mortgage execution volumes in recent months reflect the continued performance of contractor loans that are beginning to mature into executions. On the other hand, we expect a rise in financing rates exceeding 60%, which, together with the extension of the average mortgage period, leads to an increase in monthly repayments along with growing difficulty for clients in meeting their mortgage obligations.
Nevertheless, the mortgage market remains stable, with relatively strong demand and good market opportunities. Therefore, clients who know how to take advantage of the current window of opportunity will be able to benefit from today’s favorable prices in the future.