Bank of Israel data show that mortgage arrears continued to rise last month, while real estate investors set an all-time record for the average mortgage they took. The broader picture is of a mortgage market increasingly detached from the weak housing market, as borrowers are taking large loans even though apartment sales are sluggish.
The article says this is partly because one property deal can now involve more than one mortgage, especially in pre-sale projects and developer plans such as 20%-80% arrangements. In those cases, buyers often take deferred mortgages and later refinance them. That may explain the unusually large mortgages taken by investors, who are apparently betting that by the time the loans are used, home prices will rise and they can sell at a profit, or refinance into easier terms.
Last month, the average mortgage taken by investors reached 1.46 million shekels, a record high. Buyers under Israel’s Dira BeHana’a subsidized housing program took an average mortgage of 815,000 shekels, while non-investor buyers in the free market took an average of 1.1 million shekels, similar to recent months.
The largest share of mortgages, 29%, was for homes priced at 2 million to 3 million shekels. Another 28% were for homes priced at 3 million to 5 million shekels, 27% for homes up to 2 million shekels, and 16% for homes costing 5 million shekels or more. Mortgage arrears reached 4.45 billion shekels last month, up 0.4% from April. Since the start of the year, arrears have risen by an average of 1.2% a month, setting a new record every month and signaling growing difficulty among households in meeting mortgage payments.
