Israeli Mortgage Defaults Decline as Borrowers Refinance Loans

Signs of easing in Israel's mortgage market are emerging, with August data from the Bank of Israel indicating a further decrease in mortgage payment arrears. Concurrently, more borrowers are opting to refinance their mortgages by switching to different banks. The average mortgage taken out in August was approximately NIS 1.06 million, down from about NIS 1.12 million in July, a roughly 5% drop within a month and below the year's average. Total mortgage arrears also continued to fall, reaching approximately NIS 4.1 billion in August, compared to NIS 4.24 billion in July. The percentage of arrears relative to total outstanding mortgages decreased from 0.63% to 0.61%, continuing a trend observed after arrears peaked last year. Despite this improvement, over NIS 4 billion in mortgages remain in arrears, indicating ongoing financial pressure for some households.

Another notable shift is the increase in external mortgage refinancing, where borrowers move their loans between banks for better terms. This rate rose to 7.7% in August from 7%, reversing a recent downward trend. This change is attributed to falling interest rates and regulatory adjustments that facilitate mortgage refinancing. The Association of Mortgage Consultants estimates that more borrowers are exploring options to reduce their monthly payments and leverage inter-bank competition. Despite these adjustments, activity in the mortgage market remains robust, with new mortgages averaging around NIS 10 billion per month in July and August, consistent with the second quarter's pace.