Mortgage Delinquencies Rise to ₪4.2 Billion After Three Months of Decline

After a three-month decrease, the volume of overdue mortgage payments in Israel has begun to climb again. In September, these delinquencies reached approximately 4.2 billion shekels, an increase from 4.1 billion shekels in August, which had been the lowest level in about a year. This rise of about 125 million shekels in one month occurs as banks face declining interest income. The overall delinquency rate remains low at about 0.6% of the total mortgage balance, a figure that is internationally competitive. While the absolute amount has increased, the percentage has stayed within a narrow range of 0.6% to 0.7% for an extended period. The peak for the year was in May at 4.45 billion shekels, followed by a gradual decline until August. Industry experts suggest that banks had reached agreements with struggling borrowers, such as loan restructuring or temporary payment freezes, and this pace of agreements may have slowed in September, contributing to the uptick in overdue payments.

Delinquencies are defined by the Bank of Israel as payments overdue by 90 days or more. While this level is still slightly lower than the 4.3 billion shekels recorded in September of the previous year, it represents a significant 50% increase compared to the period before the October 7th war. This surge is attributed to several factors, including the sharp rise in prime interest rates following the war, which increased monthly payments for many households, particularly those with large loans taken during periods of near-zero interest. Despite these pressures, the labor market remains strong, with nominal wage growth and low unemployment.

September also saw a notable decrease in new mortgage lending, with banks issuing approximately 8.7 billion shekels, a 20% drop from August. This slowdown is partly attributed to the High Holy Days, which reduced working days for banks and appraisers. However, some in the industry anticipate a rebound in October as pending applications are processed. Data also shows that investors continue to take out the largest loans, with the average investment mortgage at 1.26 million shekels in September, compared to 1.07 million for non-investor homebuyers and 740,000 shekels for those using the "Discounted Housing" program.