Mortgage Applications Surge 20% as Interest Rates Drop

In July, Israel saw a significant surge in mortgage applications, reaching a record 11.5 billion shekels. This increase, surprising given perceived weakness in the housing market, represented a 13% rise in mortgage uptake since the start of the year. The primary driver for this trend was a decrease in interest rates, prompting many individuals to refinance their existing mortgages, effectively taking out new loans.

Further data for August indicated continued strength, with mortgage volumes averaging 10.899 billion shekels, compared to 9.118 billion shekels in August of the previous year. Although interest rates had not yet begun their significant decline during those specific months, the overall environment of lower interest rates, down by 1.25%, fueled a nearly 20% increase in refinancing activity.

Following two exceptionally strong months, the total mortgage volume in August dipped slightly below the 11 billion shekel mark. However, the past three months have been notably robust, particularly in the context of the last year and the period since the war began. This sustained high level of mortgage activity is directly attributed to a series of interest rate reductions.

Analysis of mortgage types reveals a shift, with index-linked mortgage tracks decreasing to about 9% of the total. Conversely, prime rate tracks increased to approximately 22%, and variable, non-linked tracks maintained their strength. While mortgages for all purposes and bridging loans saw declines, long-term housing credit captured a dominant 82% share of the market.

The article concludes by noting that this influx of new mortgages is a direct consequence of falling interest rates and poses the question of whether this will impact housing prices, with an answer expected following the release of the August inflation index.