"Ahead of the Bank of Israel's decision, interest rates in the mortgage market are raging," says Jonathan Berliner, chairman of the professional committee of the Association of Mortgage Advisers in a conversation with Israel Today.
"Because a mortgage is taken for an average period of 25 years, a change in future expectations can significantly affect long-term interest rates, and recently we are experiencing changes of up to 0.5% per week in the pricing of the various tracks."
Berliner describes an interesting trend that mortgage advisers have been seeing lately.
"Banks are rolling out to the public both the rise in interest rates and the risk and apprehension of future changes in the market."
Berliner, Photo: Amanda Surudi
According to him, for the first time the rate of mortgages taken by investors has fallen by less than 10%.
"Investors are sensitive and react first of all to the level of interest rates, and their exit from the market due to the high interest rates implies a change in trend," he explains.
"Interest rates in prime have risen"
In recent months, the Bank of Israel's data on mortgage volumes indicate a certain slowdown and a decline from the peak recorded in March of NIS 13.4 billion, but the average mortgage continues to break records, crossing the NIS 1 million average mortgage for residential purchase, net of investors.
"The banks' spreads on the prime track increased by about 0.15%, and the pricing of the track became more sensitive to the loan period. Since the beginning of the year, the Bank of Israel's interest rate has risen by 0.65%, the average interest rate on the prime track has risen by 0.8%," Berliner added.
"The increase in mortgage interest rates is greater than the general interest rate increase in the market, and the banks are rolling out to the public both the increase in interest rates and the risk and fear of future changes in the market."
The banks are pricing mortgage interest rates based on the yield curve of government bonds, which now represents an expectation of a 2.25% increase in the Bank of Israel interest rate over the next three years, including the expected half percent increase on Monday, after which interest rates remain unchanged.
"This means that anyone who has taken out a mortgage on the prime route must prepare for an increase of hundreds of shekels in the monthly repayment," he explained.
"There is almost no difference in the interest rate offer between a short-term mortgage and a long-term mortgage. That is, our effort to raise the monthly repayment in order to shorten the mortgage will hardly affect the interest rate."
So what is recommended anyway?
According to Berliner, "Prime is no longer always the cheapest and most lucrative route." Average long-term inflation is lower than short-term inflation, so one has to choose between paying a 'fine' for high inflation in linked tracks and fearing high early repayment fees on the unlinked fixed track. " Recall that by regulation a third of the mortgage must be taken on a fixed-rate track.
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