An increase in the volume of mortgages taken up by the public in recent months is a clear sign that the housing market is waking from its slumber
By DUDU LEVY REICHUpdated: FEBRUARY 16, 2021 18:29Construction in Israel.(photo credit: MARC ISRAEL SELLEM)
Following a two-year slowdown, in recent months the housing market has returned to life. This is not just a gut feeling, but a trend that emerges from recently released data by the Bank of Israel. The figures reveal an 11% increase in the number of mortgages taken by the public compared to the same period last year. In Israel, as in many countries around the world, the majority of private apartments are purchased with a mortgage – a housing loan received from the bank. A mortgage is a commitment for a significant sum of money, which inevitably creates no small amount of anxiety; after all, the personal and financial implications will have a long-term impact. So how can you make sure you are getting it right and making the best decision for yourselves? Over the coming weeks, we will be here to help you make sense of the subject, to prepare you for making this important decision that almost every family in Israel faces.It is important to understand the real price of this transaction from the very beginning, and no less important is to find the mortgage path and the way to it that is right for you. This may be a Ministry of Housing mortgage for those who are eligible, or it may be a mortgage from the bank. Your first step will be to meet with a mortgage advisor for information and advice. During this meeting, you will also be able to apply for a mortgage without any obligation. One person who has already held many such meetings is Hanan Abukasis, director of the Mortgage Department at Bank Hapoalim’s Tiberias branch. Abukasis, 52 and married with four children, lives in Mitzpe Hoshaya in the Galilee. 28 years of experience have given him a clear and detailed perspective on the changes in this field in Israel over the last generation.“If I compare the mortgage market that a young couple encounters today to the same market when their parents took a mortgage, the most consequential factor is real estate prices, which are on a continuous upward trend,” explains Abukasis. “As a result, young couples today need to bring in more equity. Whereas ten years ago you could get a mortgage of up to 95% of the value of your apartment or property, today there are regulatory restrictions limiting the maximum financing rate for a single home purchase to 75% for a primary residence, up to 70% financing for a second home and up to 50% financing for investment properties. In recent years I have seen more and more cases where parents are being enlisted to take out a mortgage while leasing their home, to provide the young couple with the equity they need.”Another directive set by the Bank of Israel is related to the mortgage mix, whereby at least a third of it must have a fixed interest rate, a third can have a variable interest rate every five years, and at most a third of it will have a variable interest rate of more than five years.The reason: the prime interest rate in Israel (variable interest is higher than five years) is low, and the regulator is concerned that a future increase in the prime rate may result in families finding it difficult to make the payments. “Currently, there is a moderate price rise in the national housing market, with stability over the last year or two in some places,” explains Abukasis. “Some cities even recorded a small drop in prices in recent years, but this is happening mainly in places where the government ‘Buyer’s Price’ program offers a large supply of apartments.As buying an apartment and taking out a mortgage are usually the biggest financial transactions people make in their lives, how do you help clients who come to receive advice?“I sit with them in a relaxed atmosphere and with a smile. For me, it’s about being professional in my explanations, making sure they’re simple and clear, step by step. But it’s also important to emphasize that they do not always receive a positive answer from us.”Why?“Because more than once I have had to tell customers who come to us that the deal is too ambitious for their means. The key thing is to work with them to find a mortgage that is right for them and that will allow them to meet the repayments. There are different types of housing loans, and the bank’s mortgage advisors will be able to help them choose the right mortgage for them. Anyone applying for a mortgage will be able to receive preliminary approval from the bank, which will be in effect for 24 days, based on the information they provide the mortgage counselor. This is even before they present any documents.”What is your key message for customers who come into your branch and are interested in a housing mortgage?“I advise them to match the apartment to their means. Every individual client, couple or family has their own unique needs – overall budget, equity, future expected revenue (due to a change in workplace, for example) or expected changes in family status, such as a wedding and birth. I also explain to clients that they should take into account additional expenses beyond the cost of the apartment when calculating the total budget, such as purchase tax, attorney’s fees, brokerage fees, transit costs and more. It is important to know that the bank only looks at the net asset price in order to determine the mortgage financing rate, without these additional expenses.”The Jerusalem Post and Bank Hapoalim are collaborating on a section dedicated to the important issues to consider when taking a mortgage, with challenges and suggestions for managing this important step. The above stated does not consititute an offer for credit. Obtaining a housing loan is subject to the approval of the bank and iterms and the provisions of the law. Failure to keep up with payments may result in a charge on interest on arrears and respossession proceedings.
