The Knesset has passed on its first reading a law that would require banks to offer mortgages that would allow customers to pay them off early without a service fee. The law is being sponsored by Likud MK Yoav Kisch, who said that the law, when passed, will help customers better budget their expenses, and encourage them to pay down debt.
Current mortgages will not be grandfathered into the law, and new customers will be given an opportunity to choose between a standard mortgage, and one that will not include paydown fees. However, in order to compensate banks, they will be allowed to charge higher up-front fees or higher interest rates in the latter situation. The amount of that fee will be discussed and included in the bill when it is presented for its second and third reading, Kisch said.
The MK also plans to require banks to offer existing customers the opportunity to refinance a loan, which will allow them to pay down their new mortgage without fees.
Paying down a mortgage early is often economically disadvantageous; the fees banks charge for early paydowns can amount to thousands of shekels, sometimes costing customers more than they would have paid banks in interest had they kept the mortgage until term.
The bill is supported by United Torah Judaism MK Rabbi Yaakov Asher, who said that while it was understandable that banks would not want to lose money, the needs of the public needed to come first. “If a mortgage holder managed to get the money together to pay off a mortgage, they should not have to deal with resistance by the bank,” he said.