Bank of Israel might approve a rise in interest rates that banks will charge for Mortgages

The Bank of Israel announced Sunday a number of measures that ostensibly signal an increase in credit risks in the real estate market. The possible significance of this step could be the rise in interest rates that banks will charge on loans to purchase high-leveraged land.
The Supervisor of Banks, Yair Avidan, said that "in light of the increase in risk appetite and the banking system's exposure to the construction and real estate industry, we have recently instructed the banks to hold appropriate discussions on the matter with their boards of directors and management.

Today we decided to publish a set of additional measures that will make it possible to maintain a more responsible risk management system, including, additional capital confinement to finance leveraged lands, and in addition, deepening and expanding the reporting of the banking system's exposure to the industry. We will consider the need to take further steps later, as needed. "
The announcement by the Supervisor of Banks comes against the background of the alarming data published by the CBS in the middle of last week regarding the jump in housing prices, which also caused Finance Minister Avigdor Lieberman to announce new measures in the hope that they will stop the jump in housing prices.
The Bank of Israel's Supervisor of Banks will provide the banking system with representative examples of underwriting and credit classification processes - according to the Bank of Israel, in order to illustrate and demonstrate the process of analyzing the Banking Supervision's audit teams. Of audit processes of the regulator with respect to credit to the construction and real estate industry. The examples will relate, among other things, to the financing of projects with closed financial support and the financing of land acquisition.
Expansion of reporting requirements for the supervision of the construction and real estate industry - Despite the existence of information reported on real estate, it was decided according to the Bank of Israel to expand and deepen the information requirements to be submitted by the Supervisory Banks to enable better monitoring of risk development for these industries. Per 10,000 rebates under government housing programs.
The Association of Mortgage Advisers stated: "Following the jump in apartment prices and the fear of a bubble forming, the Bank of Israel is trying to combat the phenomenon in isolation from government policy. In fact, the Bank of Israel raises funding for contractors Entrepreneurs, especially the small ones, who will not meet the new threshold requirements, will not be able to enter new projects or will have to turn to non-bank financing channels, which could lead to a reduction in construction starts. Unfortunately, the public will pay the price immediately Expand ".
Meanwhile, today the Minister of Finance will present the main steps he decided on this weekend to Housing Minister Zeev Elkin and the contractors' representatives. Later this week he will also present the steps to the heads of local government. At the forefront of the steps is a change in the method of tenders for discounted land to be offered by the government.
Contractors who undertake to sell apartments at a lower price and finish construction in a shorter time will be given priority according to the plan compared to the current situation in which those who offered higher prices for the land won tenders. Those who complete construction over a period of more than three years are subject to heavy fines. Also, it will not be possible to make any changes in the design of the apartments during the construction beyond what was agreed upon when signing the agreement with the buyers.