Israeli Mortgage Market Sees Stabilization Amidst Cooling Real Estate Trends

In June, the average mortgage in Israel remained steady at NIS 957,000, as reported by the Bank of Israel. This figure closely aligned with the year's average since January, which was NIS 960,000. The trend of escalating mortgage costs, which peaked at NIS 1.05 million in the summer of 2022, has come to a halt due to rising interest rates and declining housing prices.

The percentage of high-risk mortgages, defined as those where the monthly repayment exceeds 30% of the household's disposable income, has been on a gradual decline in recent months. In February of the current year, this figure reached a concerning peak of 49.2%, but in June, it decreased to 45.6%. However, despite the improvement, the rate remains significantly higher than two years ago when it was at 36% in June 2021.

Despite a cooling real estate market, the total volume of mortgages in Israel continues to grow. The outstanding mortgage debt reached a substantial NIS 540 billion in June, largely due to the influx of new mortgages outpacing those being paid off.

While the market's cooling has contributed to lower risk levels, there are indications that the downward trend has stalled. In June, new mortgage applications amounted to NIS 6.5 billion, slightly surpassing the first-quarter average of NIS 6.3 billion. Market experts predict that the volume of mortgages is likely to stabilize at approximately NIS 7 billion per month.

The ongoing changes in the Israeli mortgage landscape raise concerns about the potential impact on borrowers' financial stability and the overall health of the real estate market. Monitoring these trends will be crucial for policymakers and financial institutions in the coming months.