Despite Bank of Israel directives restricting the variable interest component of mortgages to one-third of the total, the amount of new mortgages rose in May 2011 to a high of NIS 4.81 billion, according to the Bank of Israel.

New mortgages granted in May were 34 percent higher than the NIS 3.58 billion granted in April. The May figure is close to the all-time high of NIS 4.82 billion in new mortgages in June 2010.

The Bank of Israel directive came into effect on May 5, but it will reportedly take several months until the new criterion applies to all mortgages. In addition, in the days before the directive came into effect, real estate sources said that there was a rush to secure mortgages by home-buyers seeking variable interest mortgages.

The Bank of Israel also reports that variable interest mortgages continued to dominate the market in May. New variable interest mortgages accounted for NIS 4.17 billion of the total of NIS 4.81 billion in new mortgages granted during the month - 86.6%.

The average mortgage interest rate on Consumer Price Index (CPI) linked mortgages rose for the fourth consecutive month to 2.63% in May from 2.48% in April. The average mortgage interest rate on CPI-linked mortgages reached a low of 2.13% in September 2010. The average mortgage interest rate on unlinked mortgages rose to 4.22% in May from 3.97% in April.

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