Mortgage Lending Surges Despite Weak Housing Market

Despite a slowdown in housing transactions, Israel's mortgage market saw significant activity in August, with NIS 10.9 billion in housing loans disbursed, according to Bank of Israel data. When including all-purpose loans secured by residential property, the total reached NIS 11.4 billion. While this represents a 5.7% decrease from July, year-to-date figures show a substantial increase.

From January to August, NIS 79.6 billion in housing loans were issued, a 13.8% rise compared to the same period last year. Including other loans, the total reached NIS 84.2 billion. This robust lending activity contrasts sharply with the sluggish housing market, where fewer deals are being closed.

The discrepancy is attributed to a lag effect, where current mortgage disbursements may reflect deals signed months earlier, particularly those involving contractor financing incentives. In such cases, buyers pay a small portion upfront and the bulk upon property delivery, delaying the need for a mortgage. The Association of Mortgage Consultants explained that the strong credit market reflects the maturation of past transactions rather than new August purchases.

An interesting shift in mortgage composition is the increased weighting of the 'Prime' interest rate track, rising from 22% to 24% of all mortgages. This suggests borrowers are increasingly willing to take on loans whose rates fluctuate with the Bank of Israel's benchmark rate, possibly anticipating future rate decreases or accepting the associated risk.

Overall, the weighted average interest rate on mortgages saw a slight increase to 4.38% in August from 4.34% in July. However, since January, the cumulative decrease stands at 0.18 percentage points. More detailed data on mortgage profiles, including interest rate types and loan-to-value ratios, will be released later by the Bank of Israel.