The state is once again fighting investors in the housing sector: The Bank of Israel has announced a ban on commercial banks from providing additional loans for the purpose of financing equity for the purchase of an apartment.
However, in order to enable interim financing for housing developers, it has been determined that a banking corporation may provide a bridging loan.
Meaning of the decision: Apartment owners will not be able to mortgage 50% of another property in their possession in order to accumulate equity to purchase a new apartment.
Apart from investors, who currently constitute about one-fifth of all home buyers in Israel, another major sector that will be affected by the directive will be the ultra-Orthodox.
"A banking corporation is not allowed to provide an additional loan to a borrower, which is intended to be used as 'equity' for the purpose of purchasing an apartment," reads a file published by the Bank of Israel.
"Any additional credit provided by the banking corporation to the borrower will be detached from the apartment purchase transaction and will be examined according to the bank's criteria in relation to the additional type of credit. For the avoidance of doubt, this applies to both consumer loans and mortgages."
In addition, the Bank of Israel has set some conditions that only if fully fulfilled, a loan will be possible: if the loan for the purpose of mediation (a loan taken for the purpose of purchasing a new apartment before the old one was sold) is mortgaged, provided that the total mortgages do not exceed 50% of the total value.
In addition, the loan amount will not exceed the amount required to complete the financing of the alternative apartment;
The loan period will not exceed 24 months - the maximum period during which the borrower is required to sell his existing apartment.
It should be noted that the directive will not apply to contracts signed in the period since last June - when the Bank of Israel published a draft on the subject.
Despite these provisions, the Bank of Israel allows a first-degree relative to assist in providing equity, in the form of an existing property lien.
The allowable financing rate is limited to 50% of the mortgaged property, when the value of the mortgaged property is not relevant for calculating the financing rate.
Meanwhile, the Bank of Israel announced that the interbank interest rate will remain at 0.1%, despite the rise in inflation.
