Request for mortgage payment deferrals surge by 350%, impacting market

25% of first-time home buyers suffered at least one spouse becoming unemployed, or placed on unpaid leave, due to coronavirus.

Real estate market (photo credit: Courtesy)
Real estate market
(photo credit: Courtesy)
Roughly 57,000 families bought their first home in the last five years and are currently dealing with at least one spouse becoming unemployed or placed on unpaid leave since March, the Finance Ministry reported on Thursday.
The financial crisis touched every fourth first-time home owning family among those who bought their real estate between 2015 and 2020. Requests for mortgage payment deferrals surged by 350% when compared to pre-COVID-19 figures.
However, the ministry’s report suggests households that did not experience hardships “climbed the bandwagon” when the Bank of Israel announced that deferrals would be given. The average mortgage taken was NIS 900,000.
The average age of a first-time homeowner who became unemployed is 34, with half of first-time homeowners now searching for work being between the ages of 25 and 34. Among those who bought their home last year, 42% did it via the Buyer’s Price Program (“Mechir Lamishtaken”) program initiated by former finance minister Moshe Kahlon.
For a third of the examined group, mortgage payments currently consume at least half of their available income.
Should all 57,000 families together stop paying their mortgages, the market would suffer a massive deferral estimated to be NIS 1.6 billion between March and September. In reality, the approved deferrals amounted to 55% of that sum.  
The report remarks on the possibility of a wide-scale inability to pay mortgages, leading to a sharp decline in market prices. Such an option was also mentioned in the recent OECD report concerning Israel’s economy.
The average monthly income of such households was NIS 17,200, and those who are now not working contributed more than half (NIS 8,884) of that amount.
Women were almost half (49%) of those placed on unpaid leave or dismissed from work. The report noted that among ultra-Orthodox first-time home buyers, half of their purchases in the past decade were mostly paid for using loans; more than 20% of such deals were completely covered by loans, with the sum needed as a down payment collected using charities in that sector.
“The findings point to a high risk in offering credit to such households,” the report suggested. It was also unclear if they will be able to pay back their mortgages once the deferral date expires, it said.  
The report also pointed to some issues with the available data.
For example, while the Central Bureau of Statistics claimed more people were employed in the legal sector in June than in February, dozens of workers were fired and leaders in that field reported wide-scale layoffs. The authors argued that they were unable to present real-time data concerning unemployment due to “technical reasons.”