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The new mortgage: more transparent, clearer, more competitive

The Bank of Israel has issued a series of new regulations that will oblige mortgage banks.

The new mortgage will be faster, more detailed and more transparent, and will also present information that is not always convenient for the bank to share with customers (such as when it is worth refinancing it), but it is doubtful whether it will bring anyone closer to the coveted apartment.

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• Real Estate

• Mortgage

• Bank of Israel

Sonia Gorodisky

Sunday, 14 November 2021, 13:06 Updated: 13:26

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The Bank of Israel convened the heads of the mortgage banks for an extraordinary meeting (which took place in the video) to update them on the reform he formulated in the field of mortgages. The main points of the reform implemented by the Bank of Israel concern the simplification of the data that make up the mortgage offer and their making it more transparent and comparable to other offers.

This is a welcome initiative, without any doubt, but it is worth mentioning that the main problem in the property market at the moment, is the level of transparency of the mortgage, but the fact that a great mortgage, it is very difficult for large parts of the Israeli public to buy their own apartment.

Here are the main points measures initiated by the Bank of Israel:

1.

- the approval in principle will be the same between the various banks and will provide uniform, clear and comprehensive information.

These data will increase the level of transparency in the mortgage transaction and help the borrower better understand the obligations inherent in the various offers he will receive.

It is important to emphasize that the information will be based on uniform calculation methodologies and will be made accessible in the same way by all banks in order to strengthen the borrower's power during the market survey and comparison process with the various banks.

2.

- In order to make it easier for mortgage takers to compare the banks' offers, a bank that has decided to offer a mortgage to a customer will provide, in addition to the mortgage basket offered by it, three uniform baskets determined by the Bank of Israel. The customer.

Below uniform composition 3 Slim:

A 100% unlinked fixed

at 0.1 / 3 unlinked fixed, variable linked 1/3 and 1/3 is linked to the prime interest rate

C.1 / unlinked fixed 2 and 1/2 Interest The frame

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Governor of the Bank of Israel, Prof. Amir Yaron: An initiative that will increase transparency in the mortgage market (Photo: Government Press Office)

When should you refinance a mortgage?

3.

- Today, in most cases, the mortgage loan consists of several tracks. Each track has a different interest rate, a different linkage mechanism and a different repayment period. The difference is not only between the different tracks in the same offer but also between the different banks' offers. Thus the interest rates presented in the approvals in principle are often not comparable.

In order to be able to compare the different baskets and the proposals of the various banks, each of the baskets in the approval in principle will also show the projected total interest rate and the total predicted payments for the entire mortgage period.

These data take into account the expected commissions and monthly payments throughout the mortgage period based on forecasts from the capital market for changes in the consumer price index and interest rates in the economy, which are updated to the date on which the approval is given in principle.

These forecasts are derived from the prices of government bonds and reflect the assessments of capital market activists regarding the future development of interest rates and inflation. It is important to emphasize that all banks will be based on the same forecasts from the capital market, which will be published by the Bank of Israel, so that the basis for comparing the various price offers of the various banks will be uniform.

4.

- this figure will be presented to serve as an indicator of changes that may occur in the amount of monthly repayments, and will be based on capital market forecasts for changes in the consumer price index and interest rates, updated.

5.

- Today, the time that elapses between applying for a mortgage and receiving the approval in principle may take two weeks or more. This fact makes it difficult for borrowers to compare the offers of the various banks. It is therefore proposed that the time between the submission of the application and the granting of approval in principle be limited to a few days only.

6.

- Customers of all banks will be able to apply for a mortgage and receive the approval in principle online.

7. Additional information that will be accessible on the Bank's website and on the customer's personal page on the Lending Bank's website:

, information on all existing types of mortgage loans and their details and more.

- When examining the viability of a mortgage cycle, it is not enough to compare the interest paid on the existing mortgage with the interest rate offered by the refinancing bank.

Additional considerations such as an early repayment fee and the time left until the next update of the interest rate on certain routes should be taken into account.

Thus, the bank will have to provide the borrower interested in refinancing the mortgage with the projected interest on the balance of payments which takes into account the actual amount the borrower will have to repay (including the early repayment fee and additional fees if any).

This interest rate is comparable to the interest rate offered by the recycling bank and will help the customer make an informed decision.

In addition, the bank where the active mortgage is managed must present to the borrower the next date on which the interest rate is expected to change.

Less headaches on the way to a mortgage.

In line for those who have the initial equity (Photo: ShutterStock)

Mortgage advisers welcome

Association mortgage advisors hastened to welcome the reform and issued admitted that "the new reform of the Bank of Israel is the most significant it was until today the mortgage market, and it is going to change substantially transparent to the customer, and increase competition in the real and true.

The combination of the uniformity of the names of the tracks, the ability to easy comparison and shortening the reaction times of the banks will bring together the transparency and genuine competition.

the most significant part of our thoughts about actually positively banks offer their customers the total cost of the mortgage on the basis of interest rate expectations and inflation in the future. this part of the reform is a revolutionary conceptual level, and is designed not to allow banks ability ' Play 'and maneuvering space within the reform, and in fact most strongly anchors ethical and professional norms.

A mortgage is the biggest economic decision most households will make in their lives.

This is not a cellular package.

The mix offered by the regulator is convenient for comparison and creates an initial reference point, but it is necessary to adjust the years, the monthly repayment and the nature of the loan, and this is the fourth mix that will be built for the client in professional advice.

These tools will make it possible to increase competition and improve the situation with customers at the end of the day.

We call for supervision to apply the same norms to the private market as well, thus raising the transparency and professional level of the entire market, and preventing the work of charlatans who may harm customers.

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