The Bank of Israel raised the interest rate for the eighth time in 11 months to 4.25% (photo: photo processing, shutterstock)
The Bank of Israel raised the interest rate again today (Monday), for the eighth time in the last 11 months, by a high rate of 0.5% - which raises the interest rate to 4.25% and the prime rate to 5.75% - the highest in 15 years
.
According to a test carried out by the national mortgage consulting network "Drachno", the 0.5% interest rate increase will result in an increase of approximately NIS 104 in the monthly repayment compared to the last payment made, and a total of approximately NIS 750 compared to mortgages taken out before the sequence of interest rate increases, in April 2022
. Note that the data refers to an average mortgage consisting of one-third prime interest, one-third non-linked fixed interest and one-third linked variable interest, the increase in repayments refers to the prime interest only.
Illustration: "The damage to mortgage borrowers is severe" (Photo: ShutterStock)
Maor Ohana, economist, CEO of Drechno, a mortgage consulting network
, points out that "the damage to mortgage borrowers is severe, young couples find it difficult to meet the monthly repayments, especially those who also used supplementary loans to increase equity or couples who pay rent and mortgage at the same time until they receive their new apartments "
For new mortgage takers, we recommend carefully examining their maximum repayment capacity and taking out mortgages with a monthly repayment that includes a margin for the continued increase in interest rates.
For those with existing mortgages, we recommend holding on tight, reducing all-around expenses and only in the case of a real fear of defaulting on payments - to examine a course of consolidating loans or spreading the mortgage over longer years.
The meaning of the two moves is a significant increase in financing costs for the entire loan period, but it can nevertheless prevent the risk of losing the property."
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"The Bank of Israel is pushing the economy to a steep slope of inflation"
Raul Sargo, who warned the Bank of Israel earlier today that a further increase in interest rates would lead to another jump in rental prices and the rate of inflation as a never-ending circle, said the following in response to the governor's decision: "The Bank of Israel is pushing the economy into a steep slope of inflation that could end in a historic peak of crisis housing within one to two years. Led by the governor, the Bank of Israel is doing the exact opposite of dealing with lowering inflation. The consumer price index, almost a quarter of which is subject to changes in the housing rental price index, jumped by more than 5% at the same time as the interest rate increases. There is no apparent reason for it to stop and in the month Next we will see an increase that could be up to half a percent in the rental price index. The result will be a continued jump in the consumer price index, which the Bank of Israel is supposed to curb and has not been able to do for 10 months in a row."
Regarding the claim that the increase in interest rates in the last year brought a halt to the jump in housing prices, Sargo says: "This result is a welcome but temporary result. The construction and infrastructure industry can benefit from any period of price stability and improve its planning and execution capabilities. We wish for long-term stability in the field of housing prices , but the Bank of Israel is now operating in a vacuum and is creating pressure that prevents construction and the establishment of infrastructure. Contractors and entrepreneurs are finding it difficult to finance their activities and we report every day on difficulties that the banks are piling up in the field of escorting."
Furthermore, Sargo says that "there is no action planned by the government for the time being and the Bank of Israel's duty is to work with the state in a system of interlocking tools that will allow a balance of its influence. The Bank of Israel must immediately stop the increases and start lowering the interest rate because its influence now is devastating on everyone who is involved in construction and in need That is, on a very central part of the components of the economy."
Real estate
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real estate
Bank of Israel interest rate