On target - the mortgage interest freeze:
The temporary finance committee, chaired by MK Moshe Gafni, held its first discussion today (Monday), centered on the Bank of Israel Governor, Prof. Amir Yaron's review of the state of the economy in the economy, including the issue of the cost of living and the increase in interest rates in the economy. The chairman of the committee said that he is concerned that the cost of living is not at the top of the governor's social order, and asked the committee's legal advisor to initiate a bill that would freeze the rise in mortgage prices for the weaker sections of the media and the interest rate in the Tela economy.
"We express great concern, the frequent increase in interest rates creates an increase in the cost of living, this is done very frequently. We are concerned that the cost of living is not at the top of the social order of the state's economic advisor. The Israeli economy is a strong economy, and it would be appropriate that those in a low economic status should not suffer more I said and I repeat, the finance committee will discuss and continue to discuss all these issues. I am asking the committee's legal advisor to initiate a bill for the committee, so that when the interest rate in the economy rises, the interest rate on mortgages will not rise. To examine legally, especially regarding the middle class and weak strata, who purchase first apartment".
It should be noted that the Bank of Israel is an independent body, and decisions on the level of interest in the economy are made only by the Bank of Israel.
When the Bank of Israel decides to raise interest rates to fight inflation, one of its goals is to reduce demand, that is, to make the public consume and spend less, which should ultimately lower prices.
The apartments are expensive, the cost of living is rising, photo: Yehoshua Yosef
When MK Gafni proposes to cancel the increase in mortgage prices while interest rates are rising, he is actually creating a counter-action to that of the Bank of Israel, which can be dangerous, since in such a case, in order to lower prices, higher interest rate increases will be needed. Recall that the Deputy Governor said in an interview with Israel Today last week Because "God forbid we get into a situation where someone would think to harm the Bank of Israel's independence and decision-making.
We've seen it happen in other countries that we don't want to be likened to."
The Governor of the Bank of Israel said during the review by the Finance Committee: "We see in the forecasts that inflation will decrease in the first quarter of 2023, and in a stronger form in the second quarter and towards the summer" - regarding the interest rate increases, he noted that there is no choice left in view of the increase in inflation, and avoiding this could lead to the stabilization of inflation and its increase .
He also called for measured wage agreements in the public sector: "Too broad agreements will have too broad an impact on the depth of inflation."
The governor also added that another new digital bank is expected to open.
The governor also referred to the interest rates on deposits: "I want to see the banks raise more and give up quickly. Besides, our role as regulators is to take care of a stable and competitive environment, a necessary condition for this is transparency, that's why we acted in many ways - open banking, switching with a click, if it's in a digital bank and we probably On the way to another one."
Thus the governor called on the public to use the various tools to lower costs in banks.
Bank of Israel.
Will fight the high prices?, Photo: Oren Ben Hakon
To the questions of the members of the Knesset regarding the damage of the interest rate increase on the public, he replied "You are in 5% inflation, and you see that the situation in Ukraine - Russia adds fuel to the inflation fire, there is nothing to be done. We are aware of the pain, we are perfecting all the data, the mortgages, and we are aware to that, but at the same time we must understand, if we don't eradicate inflation and it is set at 5%, people will start thinking about it, and then it comes on the side of the producers and consumers, and then spirals of inflation begin, and then it may rise, so it is important to move in time There are countries here that raised the interest rate long before the Americans, and their inflation is still in double digits, because even if you raise the interest rate long before the rest, you have to time it. There is one big difference, that's why we don't work 1 to 1 with what's happening In the world. Interest rates in the US are mostly index-linked, so the interest rate there mainly affects those who are going to buy an apartment. In Israel, the majority also take index-linked routes, so if we don't fight inflation, it will immediately increase this component in mortgages."
Later, the governor summarized the issue: "The measure is intended to deal with the inadequacy between demand and supply, we unfortunately recognize that this does not only come from overseas sections.
Once inflation is fixed, the risk is to the upside.
If this thing continues, it will harm the economy and harm the weaker sections, and it will also reach the mortgage people.
This is part of the reality, that in order to curb inflation, and for it to be better for everyone afterwards, we must raise the interest rate. Monetary policy takes time. These, not only at an average level. We look at the mortgages from the bottom quintile up to the highest level, along with that in Israel, the banking system also knew how to deploy these things, if necessary, it will know. The restraint process is a reality and it will have to be over time."
The governor also referred to the wage agreements that are expected to be renewed in the coming period: "We are on the verge of renewing the wage agreements in the public sector, after a gap that has opened up from the private sector, compared to a more moderate increase in the public sector. The wage agreements will cover the years 2020-2022, and most likely several years to come."
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