Israel's Banks Show Wide Interest Rate Gaps on Loans
Translated & summarized from Ice by baba
Israeli banks are earning significant profits from the wide gap between low deposit interest rates and high loan interest rates, with rates on loans ranging from 3.79% to 16.34%. One Zero offers the lowest median loan rate at 6.09%, while Mercantile Discount Bank charges the highest at 11.186%. The article advises consumers to compare offers to save money, as high interest rates contribute to increased loan burdens and mortgage delinquencies, although these have recently declined.
The story in 6 lines · by baba
- Israeli banks profit from a wide interest rate gap between low deposit rates and high loan rates.
- Loan interest rates in Israel range from 3.79% to 16.34%, with median rates varying significantly by bank.
- One Zero offers the lowest median loan interest rate at 6.09%, while Mercantile Discount Bank has the highest at 11.186%.
- Consumers are advised to compare bank offers to save thousands of shekels annually on loans.
- High interest rates are a major factor in increased loan burdens and mortgage delinquencies.
- Mortgage delinquencies have recently decreased, with 0.6% of borrowers currently in arrears.
Israeli banks primarily profit from the difference between the interest rates they offer on deposits and the rates they charge for loans and mortgages. As of August, private customers' current account balances stood at NIS 236 billion, with household deposits totaling approximately NIS 32.7 billion. The average interest rate on credit is 7.93%, while deposit rates are significantly lower, averaging 3.54% for 6-12 month deposits and a mere 0.72% for daily deposits. Loan interest rates, however, range from 3.79% to 16.34%. For instance, a bank offering a 10% loan rate and a 2% deposit rate effectively earns an 8% profit margin. The article highlights a concerning trend where many Israelis hold high-interest loans alongside low-interest deposits, indicating poor financial management. A significant disparity exists between banks, with the gap between the lowest and highest charged interest rates reaching about 5%.
Analyzing median interest rates, which can be more indicative due to preferential rates for large clients, One Zero offers the lowest at 6.09%, while Mercantile Discount Bank charges the highest at 11.186%. This substantial difference on large loans can amount to significant savings for borrowers. The article suggests that Mercantile Discount Bank's higher rates might be due to a different customer base or riskier loans. Other banks' median rates include Massad at 6.25%, Leumi at 6.84%, Hapoalim at 9.05%, and Mizrahi at 9.97%. Smaller banks like Massad and Yahav (7.01%) generally offer lower rates. The report advises consumers to shop around for loans to save thousands of shekels annually.
The rising cost of living has forced many Israelis to take out more loans, with high interest rates eroding disposable income. While mortgage delinquency rates have seen a recent decrease in August, they had previously risen. Currently, about 0.6% of mortgage holders are delinquent, with total arrears at NIS 4.1 billion. High interest rates are cited as the primary cause of these delinquencies, with borrowers who took out large mortgages before April 2022 potentially paying an additional NIS 2,000 monthly at peak rates, impacting most borrowers who rely on prime-rate-based loans.
