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Those who have gone through the process of taking out a mortgage in Israel complain that it is both tiring and at times frustrating, and that mortgages of 50-60 percent fall far short of the practice overseas.
"Compared to other countries, the mortgage system in Israel is efficient and adapted to the needs of the local consumer," insists Yakov Royter,who is deputy head of retail banking and in charge of mortgages at the United Mizrahi Tefahot Bank.
"Our system is neither cumbersome nor are mortgages small compared to what mortgage banks in other Western countries are prepared to extend. It is true that in the past, mortgages were relatively small at 20-30%, but you must realize that mortgage banks are part of the financial system. The UK and the USA have always had highly developed financial systems. In consequence, they were prepared and able to extend high mortgages.
"This was not always the case in Israel. Now, our financial system is highly developed and in some cases lenders can get mortgages of as much as 90% of the value of the property. In the past, the government supplied most of the money for mortgages - approximately 70%, against some 30% by the banks. Now, government funds account for only about 14% of the total mortgages extended, compared to 86% by the banks. Our process is much less exacting," says Royter.
"In Israel we put a greater emphasis on property as the main collateral, while our colleagues in the US and the UK place more emphasis on the credit profile and credit history of the client. This takes time, and clients are required to present evidence that they have never defaulted on bank credits and that they have paid their municipal rates in time. It is a more complicated process than others," explains Royter.
You say that some clients can get a mortgage equal to 90% of the value of the property. Isn't that the norm?
No, the standard is mortgages of up to 60% and I believe it is a good system. Part of the sharp fluctuations in real estate prices in the USA and the UK have been caused by high mortgages. When the mortgages are high, the monthly payments are high, and in times of economic hardship it is more difficult to meet payments.
When this happens, properties are dumped in what is probably a weak market and prices start to skid. In Israel this has never happened; prices may have dipped in times of depression, but they have never plummeted. Furthermore, in Israel there are practically no foreclosures.
Over 1.1 million families hold mortgages and only a few hundred are evicted annually. In 2006, approximately 600 Israeli families received eviction notices, yet only some 200-250 were evicted. In other Western countries the rate of foreclosure is much higher; in that matter our system works.