Mortgage Defaults Rise Again, Prompting Questions for Bank of Israel
Translated & summarized from Ice by baba
Mortgage payment defaults in Israel have risen to NIS 4.227 billion in September, a slight increase from previous months, amidst high interest rates and cost of living pressures. While the default rate remains low at 0.624%, concerns persist about the impact on borrowers, particularly those with large mortgages taken out before April 2022. The Bank of Israel monitors these figures closely, with refinancing activity also playing a role in the overall mortgage market.
The story in 5 lines · by baba
- Mortgage defaults in Israel reached NIS 4.227 billion in September.
- The default rate in September was 0.624% of all mortgage holders.
- High interest rates are identified as the primary reason for mortgage defaults.
- Mortgage refinancing has increased due to recent interest rate decreases.
- The data pertains to defaults exceeding 90 days.
Data released by the Bank of Israel for August revealed a surprising increase in mortgage payment defaults. Amidst high interest rates and the rising cost of living, Israelis' disposable income has decreased. The key question is the number of individuals defaulting on their mortgage payments for extended periods, specifically over 90 days.
While the overall volume of mortgage defaults has risen significantly, the Bank of Israel focuses on the percentage of defaulters, which has hovered between 0.6% and 0.7% for some time. Earlier in the year, this figure approached the upper limit, leading some to view it as a warning sign for the central bank. By April, the value of these defaults reached approximately NIS 4.4 billion, sparking concerns about potential repercussions.
In July, however, the total mortgage amount surged by 24% to NIS 11.056 billion. Concurrently, the default rate dropped significantly to 0.63%, with the value of overdue payments decreasing to NIS 4.239 billion. August saw this figure at NIS 4.102 billion, but September data indicates a renewed increase to NIS 4.227 billion.
This September figure represents 0.624% of all mortgage holders, a rate still considered low compared to previous months and to September of the previous year (NIS 4.327 billion). This is partly attributed to a relatively high number of mortgage holders in September, which stood at NIS 8.668 billion, though this figure is influenced by the holiday season when fewer people typically take out mortgages.
The article also notes the impact of mortgage refinancing. With a significant recent decrease in the Bank of Israel's interest rates, refinancing has increased. People are refinancing to secure lower monthly payments. Despite a slowdown in the housing market, the volume of mortgages remains high, largely due to refinancing, which is counted as a new loan. The primary driver for mortgage defaults remains the high interest rates. Individuals who took out large mortgages exceeding NIS 2 million before April 2022 may be paying up to NIS 2,000 more per month at peak interest, a burden that some young couples struggle to meet. It is important to note that these figures pertain to defaults exceeding 90 days, excluding those with shorter payment delays.
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