According to most forecasts, Bank of Israel Governor Prof. Amir Yaron is expected to announce today (16:00) an increase in the interest rate by 0.25 percent, to 4.75 percent, which would be a 17-year high. This is the tenth consecutive time that the Bank of Israel has raised the interest rate in order to moderate the surging inflation, and the market believes that this is not the end, and that the interest rate will be raised again in July, to 5 percent.
The expected decision to raise the interest rate by 0.25% will increase the monthly repayment of a mortgage by NIS 69, which means completing an increase of NIS 1,148 within a year and NIS 345,450 in the total interest cost on this track over the life of the mortgage. This is based on a calculation for an average mortgage of NIS 25 million, of which NIS <>,<> is in prime for <> years.
Bank of Israel Governor Prof. Amir Yaron, Photo: Oren Ben Hakon
The Mortgage Advisers Association warns of a collapse of households: "The significant increase in monthly repayments in recent months has led many families to cross the 40 percent threshold of their monthly income repayment ratio, a threshold considered dangerous according to the Banking Supervision Department, and reflecting households' difficulty in meeting mortgage payments over time."
In addition, recently published Bank of Israel data show a continued worrying increase in the public's current account credit facilities, which rose above the pre-COVID level, with an average overdraft of more than NIS 15,<>.
Serious crisis
At the same time, despite the increase in the interest rate, the Association sees an increase of 19% compared to last year in non-residential loans, using a residential apartment as collateral for the loan. This credit is provided for the purpose of distributing loans and consolidating debts, and is used to lower monthly repayments.
The association adds: "The crisis today is no less severe than during the coronavirus period. The rising interest rate, the cost of living, and the fear of recession require the relevant factors to prepare before it is too late. The public is still showing the ability to meet the mortgage burden, due to the leniencies offered by the banks in order to prevent a significant increase in mortgage arrears, but according to the unofficial data we receive, there is an increase in arrears."
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