The Bank of Israel announced today (Sunday) ideas that should make it easier for consumers of banks applying for mortgages, to compare them and choose the best one.
This is done through three uniform routes, the composition of which is determined by the central bank, with the duration of the loan being chosen by the customers.
We emphasize that these are not decisions that will be made on a set date - since a date has not yet been set for this.
These proposals were forwarded to what is known as a “hearing,” meaning receiving comments and corrections from banks and the public before making final decisions on the matter.
Banks will have to provide the customer with a principal mortgage approval in a uniform and unchanging format and within just a few days, alongside the same three "baskets" (tracks) specified.
In each of them, the customer will be able to see the total interest forecast for him, the total payments expected during the entire mortgage period and the highest monthly payment throughout the entire mortgage burden.
In addition, it will be possible to apply for a mortgage and get the approval online at all banks.
To date, the absence of these improvements has not prevented hundreds of thousands of Israelis from attacking mortgages.
And yet, they have the potential to facilitate the Dolorosa being to the coveted apartment and make order in the head - especially for those who do not really speak the language and do not read the many small letters.
Today, mortgages in Israel are offered in various tracks that can sound like Chinese to the average citizen - including unlinked fixed interest rate, linked fixed interest rate, unlinked variable interest rate, linked variable interest rate and prime.
Some have different characteristics that differ in the anchor to which the mortgage is attached and the frequency with which the interest rate is updated.
Prof. Amir Yaron, Governor of the Bank of Israel, Photo: Yehoshua Yosef
"More power for customers"
From an international comparison we conducted, we found that in most countries in the world mortgages are divided into only two main tracks: fixed and variable interest rates.
It also turned out that unlike the world, where it is not customary to combine tracks, mortgages in the country are usually composed of a mix of several tracks, which of course allows flexibility in adapting the mortgage product to customers, but also adds to its complexity.
The high complexity of the mortgage market makes it difficult for borrowers to compare the offers of the various banks.
This complexity even increases in cases where the banks' proposals include different routes given for different periods.
The Governor of the Bank of Israel, Prof. Amir Yaron, admitted today that "mortgage takers today have difficulty understanding the offers and comparing them without deep financial knowledge. The series of steps we are promoting is intended to give more power to customers."
Market surveys will be encouraged
The Supervisor of Banks, Yair Avidan, spoke at length today about the competition between the banks in this context.
"We have taken some significant steps that will increase competition between them, and assist clients in the decision-making process and execution," Avidan said.
He believes that "these measures will encourage customers to conduct a market survey before obtaining a mortgage, as it will be easier to compare the various offers, and they will increase customer control over mortgage terms - including their ability to meet their obligations," the Supervisor of Banks explained. Today.
In response to these changes, the Association of Mortgage Advisors for the Bank of Israel's reform published its position on the matter.
"The new reform is the most significant to date in the mortgage market," the association said.
According to the organization, "these changes - as far as they are implemented - are going to substantially change the transparency to the customer, and will increase competition in a real and correct way," they believe.
The Association of Mortgage Advisers and the Bank of Israel agree on the effectiveness of the move.
"The combination of uniformity in track names, convenient comparability and shortening of banks' response times will together lead to transparency and real competition," they noted.