Mortgage repayment jumps:
The Bank of Israel today (Monday) raised the interest rate to 1.25%, the highest level of interest rates in the economy since 2011. This is the third consecutive rise in interest rates, after rising 0.4% in May and 0.25% in April. .
According to the Association of Mortgage Advisers for "Israel Today", a 0.5% increase in the Bank of Israel interest rate will lead to an increase of about NIS 110 in the monthly repayment of her average mortgage and about NIS 40,000 in the total cost.
The Bank of Israel's two previous interest rate hikes have already increased the average monthly repayment by NIS 135, so that the current monthly repayment increased by NIS 245 in the monthly repayment within a quarter.
For the purpose of the calculation, her average mortgage was taken out in the amount of NIS 1 million for 25 years, 43% of it in the prime interest rate track (Bank of Israel interest rate + 1.5%).
The sharpest increase since 2011: The Bank of Israel jumped the interest rate by 0.5% // Photo: GPO
According to the Bank of Israel's forecast, the interest rate will continue to rise until it reaches a level of 2.75% in a year, which will lead to a further increase of close to NIS 350 within a year, in addition to the current increase - and a total increase of NIS 600 in monthly mortgage repayments. .
It should be noted that these are existing loans.
In a news loan, in which the fixed interest component has also become more expensive, the monthly repayment is already more than NIS 1,000 higher than its average mortgage in 2021.
Wave cycles
Meir Wieder, CEO of Wieder Mortgages, predicts that a move by the Bank of Israel to raise interest rates will lead to a wave of mortgage repayments in order to lower monthly repayments. "Rising consumer price indices and rising prime interest rates," he told Israel Today.
Wieder added: "Mortgage takers have taken out more loans to supplement equity and more loans to complete payments on the construction input index, and this will cause great difficulty and mortgage cycles and also probably a desire to also take out more all-purpose loans at the expense of the property." From the banks or non-banking companies, loans to close the existing loans and reduce the monthly repayments. "
The Bank of Israel Building in Jerusalem (Archive), Photo: Oren Ben Hakon
Mixed reactions
The president of the Manufacturers' Association and the chairman of the presidency of employers and businesses, Dr. Ron Tomer, said that this was a wrong move: This is less than half of the rest of the world. Raising interest rates is not the first answer, but a step that could only aggravate the situation and create severe economic distress among many businesses and households in Israel who have overdrafts and mortgages. I call on the Bank of Israel to avoid further interest rate hikes. In Israel. "
On the other hand, the president of the Association of Chambers of Commerce, Adv. Uriel Lin, said that raising the interest rate was inevitable, but called on the Bank of Israel to prevent harm to mortgage borrowers.
"The Bank of Israel must find a way to reduce the harm to homebuyers as much as possible," he told Israel Today. "At the same time, raising interest rates is inevitable, even though it will reduce demand.
The truth is that the Bank of Israel has been very delayed in raising interest rates, and not for the better.
The most serious threat today to the business sector and the entire public is rising cost of living and a consumer price index.
In light of what is happening all over the world, the Bank of Israel has no other effective means other than raising interest rates. "
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