The hit of interest rates: You're paying a lot more for your apartment today, you won't believe how much (Photo: ShutterStock)
The additional interest rate increase planned today (Monday) by the Governor of the Bank of Israel will deal another blow to tens of thousands of young mortgage borrowers, who are already unable to meet the monthly loan repayment, which has increased since the beginning of the year by several hundred shekels or thousands of shekels, depending on the amount of the loan, as well as hundreds of thousands of shekels in total cost of the apartment.
The prevailing discourse surrounding the rise in interest rates relates mainly to the increase in the monthly repayments paid by mortgage borrowers. However, rising interest rates and the Consumer Price Index, to which most of our mortgages are linked, also directly affect the cost of the entire loan and the increase in the cost of the loan principal.
Exactly how much has the cost of financing your apartment increased in the past year? Walla Real Estate checked, with the help of our mortgage consulting network, and discovered an alarming statistic:
The interest rate graph rises (Photo: Image processing, Shutterstock)
Did you buy an apartment for NIS 2 million before the series of interest rate increases? The cost of financing it jumped by a hysterical NIS 425,2 in just one year. This is a dangerous precedent that has never existed before, and this is before the further increase in the interest rate today, as stated, by at least a quarter of a percentage point, according to estimates.
The above figure relates to home buyers at a cost of NIS 30 million about a year ago, prior to the interest rate increases, as stated, and took out a mortgage of NIS 3 million for 856 years according to the current distribution (one-third prime rate loan, one-third CPI-indexed variable rate, and one-third CPI-indexed fixed rate).
The same loan, which required a monthly repayment of NIS 912,000 a year ago, and the total interest and indexation payments on mortgage terms at the time stood at NIS 4,950, will cost today, only a year later, NIS 1,34 a month and NIS 425.<> million in total, meaning that the cost of financing the apartment has increased by NIS <>,<> (!!), almost half the amount of the original loan.
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A young couple worried about the surge in mortgage costs (Photo: ShutterStock)
In another case, we examined an apartment at a cost of NIS 4 million;
Anyone who purchased an apartment at such a cost about a year ago and took out a mortgage of NIS 2 million under the same conditions as mentioned above will now pay an inconceivable sum of NIS 850,2 more (!!) in the total cost of the apartment and NIS 270,2 more in the monthly repayment.
In terms of numbers, a person who purchased an apartment at such a cost prior to the series of interest rate increases, and took out a mortgage of NIS 30 million for 7 years with the same distribution, paid a monthly repayment of NIS 730,1, while the total interest and indexation payments on mortgage terms at the time amounted to NIS 82.9 million.
Today, with the exact same loan, the monthly repayment will be NIS 900,2 and the total interest and indexation payments will be NIS 67.850 million. Let us emphasize this again, NIS <>,<> more.
And in order to end on an optimistic note (as much as possible) a small final tip for new mortgage borrowers: Maor Ohana, CEO of the Derechnu mortgage consulting network, which we used at the time of writing this article, recommends incorporating an unindexed variable interest rate track as a temporary track for the current period that protects borrowers from both the continued increase in the interest rate and the increase in the CPI.
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- interest