The Bank of Israel believes that the main risk for households in the corona crisis is the public's ability to repay mortgages. The central bank estimates that the risk potential exists mainly among households whose income fell by more than 20% during the crisis.
The decline in household income is expected to increase the monthly rate of return on income and make it harder for some mortgage borrowers to repay the debt, "the Bank of Israel wrote in a review published by the client from the full financial stability report that will be published soon.
The mortgage market has grown sharply in the last decade, and its total debt reaches over NIS 380 billion, with traditionally the main risk factor in it being unemployment. The Bank of Israel carefully selects words, explaining the potential risk inherent in this market following the corona crisis: "A decrease in household income may increase the monthly rate of return on income, which is a key variable in assessing a borrower's probability of insolvency," the report said.
The Bank of Israel notes that today there are almost no mortgages in which the monthly repayment constitutes over 40% of the household income, and the monthly repayment rate of the income in about 60% of the mortgages currently granted is less than 30%. Therefore, in the opinion of the Bank of Israel, even if household income fell by 20% as a result of the crisis, there is no material risk. "A stronger decline in income can lead to a risky increase in the monthly repayment ratio of the mortgage out of income, but even that in a relatively small proportion of mortgages."
"The main threat to the mortgage portfolio stems from the impact of the crisis on borrowers' ability to repay as a result of an increase in the probability of remaining unemployed. And in the more pessimistic scenario of 11% and 9%, respectively, very far from the situation that prevailed before the crisis, "the Central Bank notes.
As of June, the balance of the housing mortgage market was NIS 384 billion, while 21% of mortgages, amounting to NIS 81 billion, are frozen. "The purpose of the outline is basically to help the customers of the banking system who have run into cash flow difficulties as a result of the crisis, and need some breathing space to get through this period," Harel-Matityahu explains. "That is why this outline was created, to which all the banks and the entire banking system joined. They all adopted the outline and its purpose is to allow for deferral of payments for a certain period.
"It is important to clarify that this outline takes until the end of December 2020 and those who have not yet taken advantage of it can submit six months ahead by the end of October this year, then it can even reach mid-2021, so there is time until it comes to an end. Harel-Matityahu, a senior official at the Bank of Israel, says that the Central Bank is working to find solutions for those people who will have difficulty repaying the debt, "If it is through an attempt to reach agreements with customers, deploy The payments, extend the loan period. We are constantly thinking of all sorts of ways in which it will be possible to help those customers one day that they will come to this day, and they will come. "
"We do not currently have an exact figure that we can say for sure, because this crisis and its management is very, very dynamic. We see today that not everyone is still taking advantage of everything the outline allows them, so that means they do not necessarily have to, which they may really think will be Solution.So we are not in a hurry to draw conclusions, but we are following very closely.It is difficult to say right now in numbers what will happen in half a year, in a year, if people are required to do so.I can say with certainty that we are very sensitive to the situation.Banks also received very instructions "It is clear to be sensitive to those clients, not to rush into legal action, to try to reach all sorts of arrangements to make it easier for them to get through this period. When we get to the time and it seems there is still a problem and still need to take further steps, we will do them."