More than interest rates: the factor that will dramatically affect mortgage takers Israel today

The rise in interest rates in the economy marked the end of a period when money was cheap and mortgage takers enjoyed relatively long years in which interest rates were low and the monthly repayment hardly changed.

However, the change in the trend took place earlier this year, with a gradual increase in the consumer price index at a cumulative rate of about 4% in the past year.

The "Through Us" mortgage advisers network explains that the rise in the index has a more dramatic effect on mortgage borrowers than the rise in interest rates, and even if the prime interest rate rises to 1.5%, its effect will be negligible compared to the continued rise in the consumer price index. Also the loan principal.

For example, the company took out a NIS 1 million mortgage scenario that includes two tracks.

1/3 prime interest mortgage and 2/3 fixed and index-linked mortgage.

If the prime interest rate rises to 1.5%, the monthly repayment will increase by NIS 25, the annual increase will be about NIS 300 and the mortgage balance at the end of the year will be NIS 976,985.

On the other hand, the increase in the index by 4% (on 2/3 of the loan) means an addition of NIS 142 to the monthly repayment and a total annual payment of NIS 26,316, with the loan balance at the end of the year standing at NIS 1,002,495 - higher than the amount taken!   

According to Maor Ohana, CEO of Derechnu, both mortgage takers and those who have taken out a mortgage in recent years should be much more vigilant today for changes in interest rates and the consumer price index and should examine the loan not only on the monthly repayment but also the total cost of the loan. In the loan fund as a result of the rise in the index, existing mortgage holders should conduct a comprehensive examination of the mortgage and reduce the exposure to the index component of the mortgage to the minimum possible, depending on the monthly repayment capacity and needs.

For new mortgages, exposure to low-percentage indices and the choice of adjusted routes are recommended.

However, the most significant advice for mortgage takers is to take into account that the monthly repayment will increase in any case, so when choosing an apartment and taking out a mortgage, it is recommended to leave a security margin of hundreds of shekels per month in relation to income.

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