Moshe Gafni, the head of Israel's powerful parliamentary finance committee submitted a bill on Monday that would limit banks' ability to raise mortgage rates after central bank interest rate increases.
The Bank of Israel has raised its benchmark interest rate by 3.15 percentage points to 3.25% since April, with more hikes likely. Monthly mortgage repayments have soared by more than 1,000 shekels ($291), with high inflation an additional factor.
"To ease the financial burden, it is proposed that the interest rate set in a housing loan for the purchase of a single apartment used for living not change," Knesset Finance Committee chairman Gafni's bill said.
"And if it be decided to raise the interest rate at an annual rate exceeding at least 1%, the bank will be allowed to raise the interest rate on the loan at half the rate, and this in order to ease the financial burden placed on the borrowers."
What would happen should the law be ratified?
If ratified, the new law would go into effect on the first of the following month, and apply to new loans. Gafni's United Torah Judaism party is in the incoming conservative coalition government of Prime Minister-designate Benjamin Netanyahu.
Moshe Gafni of the Degel haTorah party arrives to a meeting with Israeli prime minister Benjamin Netanyahu, in the Israeli parliament on March 03, 2020, a day after the Israeli general elections. (credit: YONATAN SINDEL/FLASH90)The aggressive interest rate increases are aimed at countering inflation that has topped 5%, exacerbating already high costs of living.
Bank of Israel Governor Amir Yaron has warned lawmakers not to interfere with monetary policy decisions, saying the "magic solutions" they proposed to blunt the impact of interest rate hikes would hurt the weakest sectors of the economy.
He said any legislation to get around the higher rates would create risks for banks.
Netanyahu's presumptive finance minister, Bezalel Smotrich, also caused a stir last week when he said his economic strategy would be infused with religious beliefs laid out in the Torah, predicting this would help the country prosper.
