The Bank of Israel will not extend the relief granted during the corona period regarding housing loans.
This is bad news for investors, which will lead to high interest payments and the sale of their assets.
Against the background of the dizziness in the mortgage market, which led to a jump of tens of percent in taking mortgages last June, and against the background of criticism from senior finance officials, the Bank of Israel is trying to cool the boiling market with three updates on housing purchase loans.
The Supervisor of Banks, Yair Avidan: "Today we published a number of steps for managing risks and exposures in the banking system. I am glad that after an ongoing dialogue we have been able to find an outline that allows for the activity of housing improvers, alongside a certain restriction to those who purchase for investment purposes and who are not housing improvers. It is important that when making the loan and as part of a responsible underwriting process, the lending bank will use all the tools to get to know the customer's financial situation, including the use of a credit data sharing system. In addition, we do not intend to extend the validity of the two concessions granted in the face of the corona - their return to a situation similar to the eve of the crisis, is part of the process of economic recovery and adaptation to economic management along with the existence of the virus. "
The first of three updates will mainly affect investors who hold a number of residential properties and where banks will not be allowed to provide borrowers with additional loans that will serve as equity to purchase a residential apartment, and accordingly a mortgage on a residential apartment can not be considered part of equity.
However, in the purchase of a replacement apartment, the bank will be entitled to make an additional loan, for the purpose of completing the financing of the purchase, subject to the fulfillment of certain conditions.
The other updates allow banks to increase up to 70% of the value of the existing property the amount of the mortgage and beyond that to spread out the loans for a long period.
In commercial banks it is possible to deploy for a short spread of 5-7 years and in mortgage banks it is possible to deploy the loans for any purpose up to 25 years.
According to Meir Wieder, mortgage expert and CEO of Wieder Mortgages: "This is bad news for consumers in light of the fact that banks will no longer allow additional loans at the expense of existing assets, which will lead high-loan borrowers to consume expensive short-term credit through commercial banks and credit card companies. "This procedure may lead to higher interest payments among borrowers and the sale of their existing assets."
Wieder adds that the housing market is growing and the banks are under an unusual load and recommends that advance approvals in principle and mortgage performance in order to meet the purchase schedules and before a new directive enters the various banks.
Raul Srugo, president of the Builders of the Land Contractors Association: "A bizarre decision by the Bank of Israel that exceeded its authority and blatantly interfered in the housing market. The restrictions will hit first and foremost housing improvers, who also have to deal with the growing gap between the value of their apartment and the new apartment, and now they will have to deal with restrictions on the amount of temporary credit they take until the sale of their apartment and higher interest rates. In addition, there is harm to investors and hence to the tenants of the apartments who will pay a higher price for the rent due to the decrease in the supply of apartments for rent following the decision of the Bank of Israel. "
He added: "It has been proven in the past that the removal of investors and immediate activity on the demand side puts buyers on the fence to return to the housing market at the first opportunity and then actually releases a spring that flies prices up again. "Apartments and now have to pay more. Any action on the demand side in the form of a patent or a rabbit from the hat will artificially benefit in the short term but produce damage and raise prices in the medium and long term. It is time for the Bank of Israel to understand this.