The level of risk in the mortgage market does not stop: 47.4% of the mortgages taken were high risk

Posted on Jan 24, 2023 by Ifi Reporter

The level of risk in the mortgage market does not stop, and in the month of December 47.4% of the mortgages taken were high risk, that is, mortgages, where the monthly repayment of the household is higher than 30% of its disposable income, according to the housing market data for the month of December, published today (Tuesday) by the Bank of Israel.
This is the highest figure in the last 11 years, reflecting the effects of the increase in interest rates, which makes the monthly repayment of households more expensive and thus occupies a larger volume than their monthly expenses, alongside the increase in real estate prices which added to the increase in the last year by about 20%. For comparison, In December last year, the rate of risky mortgages was 36.9%, and in December 2019 it was only 29.6%.
This figure only includes the scope of the new mortgages that were added in December, but the mortgage repayments have also become more expensive for those who have already purchased an apartment, and for some of them the increase in price means that they are now allocating over 30% of their disposable income to repayment payments.
Beyond the rising level of risk, the housing market continues to become more expensive and cool: as reported earlier this month in Calcalist, the volume of new mortgages taken out in December was NIS 7.56 billion, and was the same as the volume of November, but since December is considered a relatively strong month in terms of the volume of transactions, the figure embodies the Continued cooling of the market. In December last year, the amount of mortgages taken was no less than 12.2 billion.
The downward trend is a direct result of the interest rate hikes by the Bank of Israel, which started raising the interest rate last April and has since raised it seven consecutive times from 0.25% to 3.75%, when the next decision is expected to be made on 20.2, and it is estimated that the interest rate will rise to a level of 4-4.25 %, which is expected to continue to burden the mortgage repayments of the households and the trend of reducing the taking of mortgages.
Despite the downward trend in the rate of taking out mortgages, the mountain of mortgages reached a peak of NIS 527 billion and completed an increase of 64.1% in 5 years, and 13.6% compared to December last year, when it stood at NIS 464 billion. The reason for this is that, despite the downward trend in taking out new mortgages, more new mortgages are still taken out every month than mortgages that are completely paid off. This is NIS 527 billion, most of which are affected by the increase in interest rates and inflation, and are therefore expected to continue to become more expensive in the near future.
A relatively unusual figure is the average mortgage size, which in December stood at over 951 thousand - this is the lowest figure since last February, when in some of the last months it stood at over a million shekels. However, this is still a high number compared to the average in 2021 which was 895 thousand and certainly compared to the previous years. Ostensibly, this figure may indicate a decrease in housing prices, but it is a preliminary figure and it is too early to conclude from it a slowdown in housing prices.


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