The good news: Banks will be able to defer mortgages until the end of 2020. The bad news: Repayments will rise
Will the banks come towards the mortgage holders?
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Produced by the Department of Special Supplements
To what extent will the mortgage banks come to terms with homebuyers who have run into repayment difficulties?
You better not have too high expectations, even if the Supervisor of Banks makes it easier for mortgage borrowers for the third time and allows you to defer loan payments until the end of the year for all types of loans: mortgages, consumer credit and business credit.
The main problem: the postponement will make the repayments more expensive and will only postpone the end for hundreds of thousands of unemployed or people in the IDF.
Deferred payments are like a new, costly loan.
Therefore before making a decision to defer payments, it is important to examine the implications of the deferral, including its economic price (e.g. the interest rate and the monthly billing amount after the deferral).
From March to mid-September 2020, the banks deferred loans to approximately 738,000 customers in all operating segments, totaling approximately NIS 9.5 billion.
The additional closure requires dealing with the already high mortgage repayments in Israel.
The postponement in many cases may help customers deal with the consequences of the closure which include, among other things, a decrease in revenue, damage to employment and difficulty in repayments.
The Supervisor of Banks has announced a further extension of the outline, which has been adopted by the banking system and will take effect from 1.10.20, so that the period for submitting the application for deferral of loan payments will be extended until 31.12.2020.
Consumer loans up to NIS 100,000: Customers who defer payments for a period of up to 6 months will be able to receive an additional deferral until 31.12.20 (and cumulatively reach a deferral of up to 9 months).
Customers who have not yet deferred payments and are now interested in deferring them will be able to receive a deferral of up to 6 months.
The deferral without the bank's discretion is that of the principal component of the loan.
The bank may also allow a deferral of interest.
Mortgages and credit for businesses: The last published outline will continue.
Sensitivity and determination
The Bank of Israel emphasizes: "Customers must make intelligent use of this tool and not defer unnecessary loan payments."
The Supervisor, for its part, emphasized to the banking system that it must act with sensitivity towards customers and avoid, as far as possible, taking legal action.
"We must continue to try to reach payment arrangements with a forward-looking view, depending on the circumstances of each customer, in order to enable the ongoing consequences of the crisis to be met," it said.
The outline that is formulated presents the minimum conditions for deferring loan payments, and any bank may (as is done in some banks) expand it for the benefit of its customers and at their request.
"Since the beginning of the crisis, we have been working with methods and tools in a way and to the extent that they have never been used, in order to enable the proper operation of the economy and financial markets, along with a constant effort to advise government policy," said Prof. Amir Yaron.
"The expansion of the outline that the banking system has taken on today, also through tools provided by the Bank of Israel, is another helpful tool for victims of the crisis, mortgage holders, and other borrowers who need this bridge, to get through the difficult period.
"The extension of the outline is evidence of further support by the banking system to assist its customers in these difficult times. Their commitment to the outline of loan deferral is important and welcome. The coming months will allow banks and customers to start preparing for the day after loan deferral and arrange the loan.
"The expansion of the outline is intended to give additional breathing space to customers who have encountered difficulties following the continuation of the crisis and its consequences," added the Supervisor of Banks, Yair Avidan.
"Assistance and accompaniment to clients in this complex period is before our eyes, and the expansion we announced today joins many steps taken so far, whose sole purpose is to facilitate clients.
"It is recommended to implement this alternative only after examining its necessity and cost. It is important to note that deferral of payments will not be allowed for an indefinite period, and therefore action must be taken to reach payment arrangements and repayment of debts, commensurate with customers' capabilities."
Produced by the Department of Special Supplements