Volume of mortgages secured by apartment buyers in Israel experienced a notable decline

In 2023, the volume of mortgages secured by apartment buyers in Israel experienced a notable decline, reaching NIS 71.3 billion, as per recent data released by the Bank of Israel. This marks a substantial 39.6% decrease compared to the previous year, where new mortgages totaled NIS 117.6 billion. Notably, this volume represents the lowest seen since 2019, when new mortgages amounted to NIS 67.7 billion.

Breaking down the figures further, December 2023 witnessed a surge in mortgage activity, with banks distributing an estimated NIS 5.6 billion worth of mortgages. This stands as the highest monthly volume recorded in the fourth quarter, marking a significant increase of NIS 1.1 billion from the low point observed in October, attributed to the onset of conflict in the southern regions. The December figure also represents the highest volume since August, when new mortgages totaled NIS 7 billion.

In response to economic conditions, Bank of Israel Governor Amir Yaron recently implemented a 0.25% reduction in interest rates, bringing the current rate to 4.5%, compared to the 4.75% set in April of the previous year. Notably, data from the Bank of Israel reveals a notable shift in the composition of mortgages taken out in December, with approximately 30% opting for fixed interest rates not linked to the index. This marks the highest rate since September and the second-highest since May 2022, suggesting a reluctance among new mortgage takers to anticipate a significant drop in interest rates in the near future.

The prevailing high interest rate environment has also deterred investment in apartments, with the volume of mortgages granted to investment property buyers plummeting in 2023. The total value of new mortgages in this category amounted to NIS 7.1 billion, marking a stark 45% decline from the NIS 12.9 billion recorded in 2022. Additionally, this volume represents a substantial 53% decrease compared to the NIS 15.05 billion secured by investors in 2021.

In summary, the mortgage landscape in Israel in 2023 reflects significant shifts, characterized by a notable decrease in overall mortgage volume, increased preference for fixed interest rates, and a decline in investment property purchases amidst a challenging economic climate influenced by interest rate adjustments.