The mortgage market continues to boil: In February NIS 7.3 billion were taken

The mortgage market continues to boil: Bank of Israel data show that the volume of new mortgages taken out in February was NIS 7.3 billion, a jump of 19% compared to February last year, and of 11% compared to the average in the last 12 months. Similar to January, the average mortgage amount reached NIS 800,000 in February.
The banking system notes that the strong data are due to high demand, for fear of continued price increases, and the lack of a plan to address the supply in the housing market on the horizon.
In addition, economic uncertainty diminished with the gradual return to routine, which increases confidence in buying apartments. Some banks also point out that they are seeing an increase in investor activity. "The rate of applications is also expected to be very high in March," one bank estimates.
Precisely in the field of mortgage recycling, there was a decline in February. After an average turnover of NIS 1.2 billion a month in the last 12 months, in February it fell by 28% to only NIS 872 million. The decline is probably due to the wait for mortgage holders to enter the reform in the prime route. This reform, which allows for up to two-thirds of the mortgage in the prime component, which is the cheapest component, came into effect for mortgage refinancers only at the end of February.
In recent weeks, there has been a storm in the mortgage market following the reform of the prime route. Last January, the Bank of Israel allowed new mortgage borrowers to take out up to two-thirds of the mortgage at prime interest rates, compared with a limit of up to one-third that existed previously. The prime interest rate route is the cheapest, so the expectation was that the monthly payment to the customer would be reduced. However, the banks wanted to maintain the level of profitability, making the prime component more expensive, which caused a great stir, and caused the Bank of Israel to pressure them to lower prices.
Meanwhile, the prime reform does not yet have a significant impact on the market. Data from the Bank of Israel show that the average interest rate in February in the shekel track was similar to its level in recent months and stood at 2.2%. Stability was also recorded in the adjacent track. This is probably because the process of taking out a mortgage takes time, while the reform only came into force during the month of January, and therefore its effect is not yet seen.
At the same time, it is worth noting that the weighted real interest rate on mortgages recorded a slight decrease from 1% in January to 0.9% in February, and this decrease may have been affected by an increase in the mortgage prime component, which was nevertheless taken under the easing of the reform. This is a particularly low level that was last recorded only in June 2015 and is pushing up demand and apartment prices.
The Bank of Israel also publishes the volume of mortgages that are deferred payments. The data show that in February the decline in the volume of deferred mortgages continued, although it moderated compared with January. The data show that there are currently mortgages with a deferral of payment of NIS 29.5 billion, which constitutes 7% of the portfolio, while at the height of the crisis the volume of deferred payments reached 25% of total mortgages, and in January was 8%. However, this is twice as high as pre-crisis figures, so the volume of deferred mortgage payments was 3% of total mortgages.