The Bank of Israel announced a dramatic change in Israel’s mortgage policy Monday, saying it will reverse the current limits on variable rates in bank loans given for house purchases.
Currently, the Bank of Israel only allows for a third of any mortgage to be repayable according to a variable interest rate linked to the prime rate, while at least two-thirds must be taken at a fixed rate.
With the new change announced Monday, that ratio will be turned on its head, allowing Israelis to take up to two-thirds of their mortgages with a variable interest rate.
“Due to the conditions prevailing in the market we think it is right to remove the restriction on the prime rate in the mix of the mortgage, and therefore ease the situation for those taking a loan,” Bank of Israel banks supervisor Yair Avidan said in a statement.
Saying that the move would give mortgage takers more options, Avidan insisted the eased restrictions “maintain the balance required for both the loan takers and the banking system.”
In Israel, the typical down payment on a mortgage is 40 percent and an average apartment costs close to NIS 1.5 million ($390,000).
Earlier this year, the Bank of Israel announced that amid the economic fallout of the coronavirus pandemic, all Israelis who have taken mortgage and credit loans will be able to delay the return payments until the end of the year.