Concern: mortgage repayments of tens of thousands who went on unpaid leave exceed half their income

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by Ifi Reporter Category:Capital Market Nov 26, 2020

The Ministry of Finance's chief economist's examination of the economic situation of the victims of the economic crisis raises concerns that the mortgage repayments of tens of thousands of households who bought an apartment in the past five years and went on unpaid leave exceed half their income.
Assuming a fixed and unlinked average interest rate of 3.2% for a repayment period of 30 years, it is obtained that the monthly repayment of households that purchased a first apartment in 2019 and were expelled from the Knesset amounts to NIS 3,900. Was 23% on average, and in the two lowest quintiles the rate of return was higher than 30% even before leaving for the Knesset. For a third of households, the amount of the refund is at least half of their income.
Repayment at a rate of more than 50% of income is considered risky at average income levels. The Bank of Israel instructs banks not to grant a mortgage in the event that the repayment rate exceeds 50% of the income - except in cases of high income.
With unpaid leave or dismissal, when the employee who is on unpaid leave is entitled to unemployment benefits, the average rate of return rises to 33%, and in the two lowest quintiles he jumps considerably. In this situation only in the two highest quintiles the rate of return is still lower than 30%. Among 59% of the households in which breadwinners are taken on unpaid leave (approximately 34,000 households), the rate of reimbursement at the time of application, including unemployment benefits, is higher than 30%.
The situation is more serious, of course, among those who do not receive unemployment benefits or compensation for leaving for unemployment benefits: in the absence of entitlement to unemployment benefits, the rate of return jumps dramatically in all income quintiles. %% - This ratio is almost doubled during the sick leave period, if the disabled spouse was not entitled to unemployment benefits.
However, the economist survey shows that the theoretical damage from freezing mortgage repayments to the banking system is limited and does not threaten the stability of the system: "If all households that purchased a first apartment in the last five years "For a deferral amount of NIS 1.6 billion in March-September 2020. This amount is 45% lower than the total mortgage payments actually frozen in that period. This gap may be filled by first-time home buyers who purchased their apartment before 2015 or other households."
The average wages of homebuyers and mortgage holders are higher than the average of those going on unpaid leave due to the corona crisis. Out of about 240,000 apartments purchased as a first apartment in 2019-2015, in about 57,000 households at least one of the spouses was on unpaid leave or fired in March-April 2020. The survey shows that the average salary of disabled people who purchase a first apartment was 8,884 Gross shekel per month. This wage is relatively high compared to the average wage of all the disabled in the economy at that time: NIS 6,342.
According to the economist, the explanation for this is in the differences in the age distribution between first-time home buyers (who were expelled or fired) and the entire population that was disabled. The economist notes that %.

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