The difference in the structure of mortgages in Israel could leave the local mortgage and property market safe from the shockwaves reverberating from the collapse of the US subprime mortgage market. "Past data analysis shows that Israeli housing prices are not sensitive to US and UK housing price fluctuation and that the risk of contagion of the Israeli market is low," Bank Leumi's chief economist Gil Bufman said in a weekly research note analyzing the chances of the US mortgage crisis affecting Israel. "The difference in structure of these two markets and their institutional setup, seems to make the Israeli mortgage market less vulnerable than the US market." One of the main differences between the Israeli and the US market is the use of mortgage financing and saving ratios and differences in the ease of acquiring a mortgage. "The US practice of applying for a mortgage for financing purposes other than real estate purposes, such as ongoing consumer spending, is quite common. This is generally not the case in Israel," Bufman said. "In the case of Israel, the degree of dependency on mortgage financing as a source of consumption purchases is relatively small and this is evident in the high savings ratio of Israeli households, which is about 30 percent with the comparable ratio in the US being less than 1%." Bank Leumi noted that the US residential mortgage loans were equivalent to 45% of the total value of residential real estate compared with less than 12% in Europe, while every second household in the US was carrying a mortgage. "Unlike the almost 'automatic' approach in the US for approving household credit, in the case of Israel there is a much more rigorous evaluation of the applicant's loan servicing capabilities as a condition for mortgage approval," said the bank. Similarly, Shai Lipman, real estate analyst at IBI investment house was skeptical about the potential spillover effect of the US crisis onto the Israeli market. "There are no subprime mortgages as such offered in Israel as Israeli banks are very unlikely to give out such loans or engage in the US practice of refinancing deals," he said. Similarly, Hanan Schlesinger, CEO of Anglo-Saxon real estate company said strong economic fundamentals and the very low interest rate environment Israel has been experiencing would make the local real estate market more resistant to the shocks that have been hitting the US mortgage market. "Even if the local market will be down, but the economy strong, we might see an increase in the second hand housing market as investors seek alternative routes," said Schlesinger. Bank Leumi, concluded that what could cause a downturn in the Israeli mortgage market would be changing conditions badly affecting the Israeli economy including a global recession, a deterioration in the security situation and inappropriate economic policy. "This would most likely lead to an increase in the rate of unemployment, an erosion of household income and difficulties in servicing mortgage debt." Meanwhile, in a note to investors last week, Bank Leumi warned that the continuing decline in the supply of housing here would boost housing prices, which would also affect rental prices and have a direct impact on the consumer price index. "As housing prices increase against the backdrop of a shortage in appropriate supply, the housing component of the CPI is expected to capture an increasing portion of the rise in inflation," said Bufman. Furthermore, Bank Leumi noted that housing prices in Israel were not directly sensitive to the pricing developments of housing in the US, indicating a timing difference of cycles in these markets. "The negative trend seen in the US housing market is not expected to directly or significantly affect the continued rise in housing prices in Israel," he said.