Israeli mortgage rates on the rise

(As reported by Globes Israel Business News on 11 February 2016)

Mortgage interest rates in Israel shot up in February. The average rate on index-linked mortgages rose to 2.85%, which compares with 2.66% in January and 2.58% in December, according to Bank of Israel figures. Since June 2015, when the rate was 2%, there has been an almost constant rise. The rise in mortgage rates is across all loan periods. On 10-15 year loans, the rate rose to 2.73% in February from 2.66% in January.

On a longer time perspective, mortgage rates are still low. Rates are coordinated with Bank of Israel interest rates, and the central bank’s rate is at a historical low, with analysts estimating that there is no trigger for a rise on the horizon.

The average interest rate on unlinked shekel mortgages rose to 2.6% in February, from 2.54% in January. The average rate takes account of both variable-rate and fixed-rate mortgages.

At present, variable-rate mortgages offer the lowest rates. Variable rates are based on the prime interest rate, which in turn is calculated as the Bank of Israel rate plus 1.5%. The bank’s rate is currently 0.1%, giving a prime rate of 1.6%.”

[RE/MAX commentary]It should be noted that rate increases primarily affected index-linked loans. Any changes in non-linked or prime-linked loans were minimal. According to statistics recently published by Bank Mizrachi-Tefahot, Israel’s largest mortgage lender, almost 2/3 of all mortgage loans being currently approved are non-linked, fixed-rate or prime (or a combination of the 3). Index-linked loans (while offering lower interest rates than fixed or non-linked loans) are much less popular since mortgage lenders have made fixed-rate & non-linked loans available at reasonable rates.