Rush for Mortgages Ahead of VAT Hike

YERUSHALAYIM -

A last-minute rush for mortgages was seen on Wednesday, as home buyers tried to beat the VAT hike at the end of May, Globes reported.

Banking industry sources estimated demand for mortgages in the past few days at 40%-50% above normal, which will push the total worth of new mortgages granted in May to an estimated NIS 4.7-4.9 billion, with one bank predicting the figure will exceed NIS 5 billion.

If that prediction proves true, and the NIS 5 billion threshold is crossed, it will be the largest monthly figure for new mortgages so far this year.

“People are rushing like mad to the banks. We haven’t seen anything like this in a long time,” said a top banker. “The combination of the VAT hike and the low interest rate are creating heavy customer demand.”

The 1% VAT hike to 18% will go into effect on Sunday, June 2, which means that any homebuyers who cannot close the deal by Friday will pay an additional NIS 15,000-20,000.

The banks believe the situation will calm down in June, partly because the rush to close deals by May 31 will reduce the number of transactions next month. They also note that Central Bureau of Statistics report earlier this week that demand for new homes has fallen and will be reflected in mortgage figures in the coming months. On the other hand, the interest rate cut will boost housing demand.

“It is still hard to assess the mortgage market trend in the long term. On one hand, there are expectations that prices will fall, and there are quite a few people who prefer to sit on the fence. On the other hand, everyone is seeing that real estate prices are not stopping, which is driving some people to prefer to buy homes now and not wait for a possible future drop in prices,” said a banking source.