ISRAEL AT WAR - DAY 139

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Bank of Israel sets out plan to freeze mortgage, loan payments for 3 months

Central bank says steps provide financial relief and ease cashflow crunch in wake of Hamas onslaught and ongoing war

Sharon Wrobel is a tech reporter for The Times of Israel.

The Sderot municipality reports a direct hit to a building sustained during a rocket barrage on October 13, 2023. (Sderot Municipality)
The Sderot municipality reports a direct hit to a building sustained during a rocket barrage on October 13, 2023. (Sderot Municipality)

Israeli banks and credit card companies have agreed on a financial relief package to ease the credit, mortgage and fee burden for households and businesses located near the Gaza Strip, first-degree relatives of those killed or abducted during last week’s onslaught by the Hamas terror group, and mobilized reserve soldiers, the central bank announced late on Sunday

War erupted in Israel after Hamas’s October 7 massacre, which saw more than 1,500 terrorists burst across the border into Israel from the Gaza Strip by land, air and sea, killing over 1,300 people, injuring almost 4,000 and seizing some 200 hostages of all ages under the cover of a deluge of thousands of rockets fired at Israeli towns and cities.

The vast majority of those killed when gunmen rampaged through border communities were civilians — men, women, children and the elderly. The ongoing barrages of rockets have left many businesses closed and schools shut.

In response to the emergency situation, the Banking Supervision Department asked the country’s lenders and credit card companies to adopt a broad relief package to ease the credit and fee burden for a group of four types of customers: households and businesses living within a 30-kilometer (19-mile) range of the Gaza Strip border, Israelis who have been evacuated from their homes, reserve soldiers, and first-degree relatives of Israelis who have been killed or abducted or are missing.

As part of the relief package, homeowners who are among the designated groups will be able to freeze their mortgage payments for a period of three months and bear no interest or other fee charges. The measure also includes a three-month deferral of repayments of consumer loans of up to NIS 100,000 and business credit of up to NIS 2 billion.

Homeowners will have an option to either add the delayed payments at the end of the mortgage period or spread out the amount throughout the remaining mortgage period. For example, a homeowner with a 20-year mortgage paying NIS 3,000 a month can choose to pay the deferred NIS 9,000 at the end of the mortgage period without any additional costs.

Volunteers prepare aid packages and supplies for Israeli soldiers and evacuated residents in Tel Aviv on October 12, 2023. (Gil Cohen-Magen/AFP)

Consumer and businesses who freeze their loans will need to pay the deferred amount at the end of the loan period.

In addition, the designated four groups of customers will also be exempt for a three-month period from paying current account or other fees other than transactions involving foreign exchange, securities, and foreign trade.

“During these difficult times, we all must get involved, and it is important that the banks continue providing solutions to the public in dealing with the economic difficulties resulting from the war,” said Bank of Israel Governor Amir Yaron . “We brought together the heads of the banking system in order to formulate a uniform plan, with an emphasis on assisting the population that has been harmed, the security forces, and those who have to evacuate their homes.”

“I am certain that this plan will help the public get through this challenging period,” said Yaron.

Israel’s largest lenders, which have generated huge profits over the past year as they have been enjoying the fruits of high interest rates on loans and mortgages, have come under fire for not doing enough to give back. Meanwhile, the sharp increase in interest rates from a record low of 0.1% in April 2022 to 4.75% has rapidly fueled the costs of mortgage and loan holders. The average cost of monthly mortgage payments has gone up by an estimated NIS 1,000 over the past year.

“The strength and robustness of the Israeli banks has been developed over many years, with the aim of now backing and supporting the Israeli population, and particularly helping those who have been harmed by the war,” said Supervisor of Banks Daniel Hahiashvili. “The plan that we are issuing is an important measure in our work, and provides a response in the areas of credit and fees to both households and businesses.”

“It also makes it significantly easier on their cash flow during the coming period,” Hahiashvili added, estimating the cost of the plan at about NIS 2 billion to NIS 3 billion ($500 million-$750 million).

All other bank customers will also be given the option of deferring their mortgage and loan repayments for a period of three months. The delayed payments will be added to the end of the loan period and will bear interest that shall not exceed the interest rate in the customer’s loan contract, according to the Bank of Israel’s outline. No fees will be charged for the deferral of repayments, the central bank said.

This set of relief measures will take effect by October 31, the central bank said.

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