Israeli lawmaker calls for bigger mortgages as homebuyer prices drop

A general view of the Tel Aviv skyline is seen through a hotel window in Tel Aviv, Israel May 15, 2017. REUTERS/Amir Cohen/Files

JERUSALEM, June 19 (Reuters) – The head of Israel’s parliamentary economy committee on Sunday asked the central bank to consider allowing future homeowners to take out mortgages worth more than 75% of the value of a home to help buyers cope with the housing boom. costs.

Michael Bitton, at a committee meeting on Sunday, urged the Bank of Israel to look into a pilot program that would allow mortgages to reach between 80% and 90%. Israel has long had conservative banking regulations to protect the banking system.

Along with the lowest mortgage interest rates, house prices have more than doubled since 2010, rising 16% in the past year alone. Tent protests are starting to pop up across Israel similar to 2011.

Data shows that a four-room apartment in Israel costs on average almost 2.5 million shekels ($723,380), with prices much higher in Tel Aviv, Israel’s financial and cultural capital.

“The funding limit (75%) dates from 2012 and is no longer tied to the continued rise in house prices,” Bitton said. “Many mortgage borrowers take out an additional loan – from banks or a non-bank institution, usually for a shorter term and at a higher interest rate than the mortgage itself.”

Bank of Israel official Ziv Naor noted that only 0.02% of mortgage buyers had significant repayment problems.

“The current perception is that the risks do not warrant a relaxation of restrictions,” she said. “Interest rates and inflation are rising, and so are the monthly payments for those who have taken out loans. The public needs to understand the risks and think carefully about whether they will be able to afford those loans.”

Still, the Bank of Israel said it would consider Bitton’s claims.

Inflation, to which most mortgages are tied, hit a new 11-year high of 4.1% in May and is expected to approach 5%. The Bank of Israel responded with two rate hikes totaling 0.65 percentage points to 0.75% and economists expect further hikes in 2023.

Last week, the Israeli government said it planned to dramatically increase housing starts and extend a rebate program aimed at limiting the rapid rise in property prices as demand continues to outpace the offer. Read more

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Reporting by Steven Scheer; edited by David Evans

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