Mortgage Defaults Drop to 0.6% Amid Falling Interest Rates

Despite a high cost of living and interest rates, the number of Israelis defaulting on their mortgage payments for over 90 days has unexpectedly decreased. In August, the total value of these overdue mortgages fell to NIS 4.102 billion, representing 0.6% of all mortgages, the lowest figure in recent months. This decline occurred even as new mortgage lending remained high, reaching NIS 11.5 billion in August.

This trend contrasts with earlier predictions of an increase in defaults, potentially due to a relative decrease in interest rates compared to the previous year, making monthly payments more manageable. The number of Israelis falling behind on payments had risen earlier in the year, reaching a peak of approximately NIS 4.448 billion in May, or 0.675% of all mortgages. However, the percentage of defaults has been steadily declining since then.

Mortgage refinancing has also surged, hitting a record NIS 4.507 billion last month. This surge is attributed to falling interest rates, which incentivize borrowers to refinance their loans, effectively lowering their monthly payments. This refinancing activity contributes to the overall high volume of mortgage lending in Israel, despite a slowdown in the housing market.

High interest rates were previously identified as the primary driver of mortgage defaults, particularly for those who took out large loans exceeding NIS 2 million before April 2022. These borrowers may have faced monthly payment increases of around NIS 2,000, straining the budgets of many, especially young couples. It is important to note that these figures specifically track defaults exceeding 90 days, excluding those with shorter payment delays.