Israel: number of new mortgages increased 21% in March
The low interest rates have been pushing up new mortgage taking to the highest monthly amount for more than a year.
According to data published today by the Bank of Israel, 0% interest in the Israeli economy has greatly impacted the mortgage market. New Mortgage taking has jumped 21% in March to NIS 5.6 billion, up from NIS 4.6 billion in February, and NIS 4.5 billion in March 2014.
The amount of mortgages taken in March was the highest over the past year and one of the highest taken in one month in recent years. The only time mortgage taking had come close to this figure recently was in December, when NIS 5.5 billion worth were taken in mortgages, right after former Minister of Finance Yair Lapid’s 0% VAT plan was canceled.
This huge figure for mortgage taking in March includes mortgage recycling. The recycling of mortgages is encouraged by the Ministry of Construction and Housing, who’s extended the program for those who are entitled to recycle mortgages through to the end of August, due to a low response to date.
March mortgage taking shows a gap between fixed and variable interest rate mortgages that is getting wider and wider. For years, mortgage takers had preferred variable rate mortgages, but over the past year the gap has narrowed and since January fixed mortgages has been the preferred financial instrument due to low interest rates. While in January and February the preference for fixed rate mortgages over variable rate mortgages was at less than NIS 200 million – a narrow preference- in March the gap widened to NIS 500 million.
Of the new mortgages taken in March, NIS 3.05 billion was in fixed rate mortgages and NIS 2.55 billion in variable rate mortgages. Mortgages worth NIS 3.57 billion were not linked to the Consumer Price Index (CPI), while NIS 1.95 billion in new mortgages were linked to the CPI.