Last year was a record for mortgage origination in Israel. The year 2019 saw a total of NIS 67.7 billion loaned in mortgages for homes to Israelis, more than 13% higher than the NIS 59.6 billion loaned out in 2018. Israelis at the end of 2019 owed NIS 370 billion in mortgages, double the amount a decade ago.
All-time low interest rates were a major factor for the large jump in mortgage loans, industry experts said. The average interest rate for mortgages in 2019 was 3.7%, compared to 3.9% in 2018. With rates expected to remain low, experts believe that 2020 will break the previous year’s record.
Demand was another major factor, experts said. Many potential buyers had been holding out for housing prices to decrease, but in recent months the opposite has been happening in many locations, so now buyers are seeking to purchase before prices go up even further.
One reason for the previous lowering of demand was the expectation that the Price Resident program would lower prices overall, but that did not come to pass. With Moshe Kahlon out as Finance Minister even if the Likud wins the March election, the likelihood is that the program will not be renewed, but will be replaced by another government effort to regulate housing prices.
While banks – and the government – are not overly concerned over the large number of mortgages being taken out, there was one note of caution. Some 35% of mortgages taken in 2019 were for homes and apartments in which buyers borrowed more than 60% of the total cost. In 2017, only 25% of mortgages were for homes in which buyers put down less than 40% of the total cost, indicating that buyers are using more of their paychecks to fund their monthly payments.
While not considered high-risk loans, the larger mortgages were considered somewhat riskier, experts said.