Mortgage Boom Continues Amid Frozen Real Estate Market

Mortgage lending in Israel is surging, with the total amount issued for housing approaching 100 billion shekels since the start of the year. Data from the Bank of Israel reveals that as of November, 97.5 billion shekels have been lent for housing, a significant increase of approximately 14% compared to the same period last year. This pace is nearing the record levels seen in 2021-2022.

However, this boom in mortgage issuance stands in stark contrast to the stagnant physical housing market, with a notable disconnect between the high volume of loans and a low number of property transactions. The Association of Mortgage Consultants suggests that the October increase in lending may be partly due to seasonal factors following the High Holidays, and that the high loan volumes are largely a result of past deals and financing promotions being finalized.

Analysis of October's mortgage data also shows a shift in loan types. The proportion of prime-rate loans increased to 28% from 26%, while inflation-linked loans accounted for only 8%, one of the lowest rates in recent years. This suggests borrowers are trying to avoid inflation exposure and may be anticipating future interest rate cuts.

Despite expectations of rate reductions, borrowing costs have not decreased. The weighted nominal interest rate rose to 4.42% in October, up from 4.35% the previous month and higher than the preceding three months. Bridge loans also saw a slight increase in their share of housing credit.

The Association of Mortgage Consultants warns that the combination of high credit volumes and a challenging interest rate environment requires caution from borrowers. They advise the public to remain vigilant, carefully assess their repayment capacity, and tailor their mortgage mix to their actual needs.