At the beginning of October, the Bank of Israel raised the interest rate from 2% to 2.75%, and the prime rate increased as a result from 3.3% to 4.25%.
At the beginning of 2022, the Bank of Israel interest rate was only 0.1%.
Macro forecasters estimate that in a year this interest rate will be 3.5%.
In the USA during this period the central bank interest rate increased from 0.25% to 3.25%, a trend we have also seen in other countries.
What is the effect of the interest rate increase on household investments in Israel?
Since the beginning of the year, government bonds have eroded between 13% and 16% in bonds whose maturity is five years or more, and at lower rates in shorter-term bonds.
This had an impact both on the investment portfolios in the bond section and on the pension instruments of their types in this section. At the current price level, the bonds embody a return (before tax) of 2.5% to 3.5% in the shekel ones and the index-linked ones 0.4%-0.8% in addition to index-linking. At the same time, there was an increase in the interest rates paid on bank deposits.
According to a publication by the Bank of Israel in September, the average interest rate on short-term deposits (up to 3 months) was 0.75%.
In fixed interest deposits (2-5 years) it stood at 2.7%.
50 billion shekels were invested in deposits - half of them at variable interest and half at fixed interest.
These deposits are not liquid for the period committed to by the depositor.
One of the alternatives to these deposits is investing in financial funds.
so what are we doing?
Checking what is invested, examining the possibility of investing in financial funds as an alternative to deposits, taking into account the needs and the taxation aspects, and reorganizing the investments in the solid channel in light of the increase in interest rates, the decreases in bond prices and the current alternatives that are available.
In checking the investments and getting recommendations on what to invest, you can use investment advisors.
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