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Number of mortgage loans down, as average borrowing goes up

Bank of Israel figures this week show lowest number of mortgage loans taken in July since September 2021, but average loan at NIS 1.08 million

Israelis at an ATM machine in Jerusalem on February 22, 2018. (Dario Sanchez/Flash90)
Israelis at an ATM machine in Jerusalem on February 22, 2018. (Dario Sanchez/Flash90)

Mortgage borrowing is continuing to slow down but the average mortgage loan has climbed to new heights, according to figures released this week by the Bank of Israel.

In July, 9,709 mortgage loans were taken, down from 12,024 in June, and 12,064 in July 2021. That represents a drop of 21% on the month and about the same on 2021 numbers.

The number of mortgage loans in July was the lowest since September 2021, when 7,779 loans were taken.

Investment purchases are also slowing. Loans on investment properties are down to 1,062 in July this year, compared to 1,691 in July 2021, a fall of 37%.

The overall value of loans in July fell to NIS 10.1 billion ($2.97 billion), compared to almost NIS 11.9 billion in June ($3.5 billion) and NIS 11.5 million ($3.38 million) in July 2021. Most loans represent between 60% and 75% of the value of the property mortgaged.

Meanwhile, the average mortgage loan in July was for about NIS 1.08 million ($317,000)

The newest housing report by CBS shows that data from June suggests prices rose at an annual rate of 17.8%, the fastest in a decade.

The Bank of Israel main offices in Jerusalem, on August 12, 2021. (Yonatan Sindel/Flash90)

Higher interest rates, which directly affect the affordability of new mortgages are part of the issue. Just last week, the Bank of Israel delivered its biggest increase in two decades to the benchmark interest rate, raising it by 0.75 points to 2.0% as inflation reached 5.2% over the past 12 months. This follows another 0.75% increase in July, and the expectation is that rates (and therefore monthly mortgage payments which are not fixed but are tied to the prime rate in some way) will rise accordingly.

But real estate agents across the country report a shortage of properties listed for sale. Given that other economic indicators are relatively healthy, it may well be the case that potential sellers are waiting to put their homes on the market in the belief that, even over a few months, they may be able to ask for much more.

The mortgage market is notoriously complex. The Bank of Israel is also attempting to make the process of taking a mortgage more straightforward and transparent. This week, the bank touted a new dedicated website that sets out to explain details a potential borrower needs to know about alternative types of mortgages, help them to understand how much they can borrow and offers suggested questions to ask of themselves and any lender.

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