in based neighborhoods buyers pay the lowest interest - in low-income neighborhood pay the highest


by Ifi Reporter Category:Real Estate Dec 10, 2019

Buyers in based neighborhoods pay the lowest average interest rate on the mortgage, while low-income neighborhood buyers pay the highest interest rates on average. This is according to a study published by the Bank of Israel.
The study, conducted by Dr. Natalia Pressman and Dr. Nitzan Tzur Ilan of the Bank of Israel Research Division, attempted to examine the impact of various factors on determining the interest rate to reflect the risks posed by regional housing market characteristics.
The analysis is based on over 80,000 mortgages provided by the banking system in 2013-2010 and the properties of the assets funded through these mortgages.
According to the study, there are interest rate gaps on the mortgage, which increases if the property is distant from the center of Tel Aviv and has a lower socioeconomic rating. 1.65% depends on the socioeconomic status of the property, however, 80 km and above the real interest rate rose to 1.63% -2.01%.
In general, interest differentials found between the regions range from 0.054% between purchasing a property located 80-40 km from the center of Tel Aviv in a more upscale neighborhood (high socio-economic level) compared to mortgages to purchase properties located up to 40 km from the center of Tel Aviv in the neighborhoods At a high socioeconomic level, and 0.248 percentage points, on average, between mortgages and property purchases located more than 80 km from the center of Tel Aviv in low socio-economic neighborhoods compared to mortgages to purchase properties located up to 40 kilometers from the center of Tel Aviv in socio-level neighborhoods - High economic, other factors are fixed.
It has also been noted that most households in Israel purchase the apartment in which they live. According to CBS data, 71.8% of households own at least one apartment. 85% of the purchased apartments are partially financed through mortgages.
The study also shows that high competition between the banks in the mortgage market lowers interest rates: the addition of one banking corporation in the locality where the property is purchased is associated with a decrease of 0.016% in interest rates, on average, all other factors are fixed, while the addition of one banking corporation in the locality where the mortgage is taken is 0.009% interest rate decrease.
Enhanced housing payers, on average, have a 0.3% lower interest rate compared to first-time home buyers with similar characteristics who purchase a home in a similar location; The gap between investors and first home buyers is even greater - 0.07% in favor of investors.
In addition, borrowers who take out a mortgage at a bank where they run a current account pay, on average, a lower interest rate of 0.13% compared to customers who take out a mortgage at a bank that does not know them as customers.
Higher-income earners pay lower interest rates on mortgages: a 10% increase in household income, with all other factors fixed, is associated with a 0.02% drop in annual interest rates.



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