Average mortgage amount given by the banks to the public decreased in June by 0.7% to NIS 988,000

The average mortgage amount given by the banks to the public decreased in June by about 0.7%, to NIS 988,000 compared to NIS 995,000 in May of this year. In June, banks made 12,024 mortgages and marketed a total of 11.9 billion shekels - according to data published by the Bank of Israel.
The decrease in the average mortgage amount occurs at the same time as the decrease in apartment sales and the stagnation in the increase in the volume of mortgages in recent months, after the record recorded in March of this year - NIS 13.4 billion. The decrease in the amount of the mortgage does not necessarily herald a decrease in apartment prices or even a moderation in price increases, but it may indicate a decrease in the ability of apartment buyers to withstand sharp price increases in the future.
This is the first decrease in the average mortgage amount since November 2021. Mortgages are the main source of financing and the engine for the increase in apartment prices in recent years, and the rate of increase in the average mortgage amount was much greater than the rate of increase in apartment prices. The borrowers financed the increase in mortgages through an increase in the repayment amounts and the extension of the repayment dates of the mortgages. Bank of Israel data shows that since January 2020, on the eve of the outbreak of the corona virus, the average mortgage amount taken by apartment buyers has increased by 39%, while the apartment price index has since increased by 24%. This means increasing the mortgage burden by an average of NIS 278,000, which is an addition of about NIS 1,650 to the monthly repayment.
Although the two indices, the housing price index and the average mortgage amount, are interrelated and change in the same direction, it is difficult to point to a straight relationship between them in the short term. A decrease in the mortgage amount in a certain month does not necessarily reflect a corresponding decrease in the price of the average apartment. In most cases, the mortgage is actually executed a few months late after the purchase of the apartment, therefore examining the average mortgage amount, as well as the changes in the mortgage amounts, mainly provides a retrospective view of the changes in apartment prices.
Between June 2021 and January 2022 there was no increase in the average mortgage amount, even though the housing price index increased during this period by 9%. The average mortgage amount returned to a sharp increase in February this year, and has since completed an 8% jump. The housing price index has completed a 5.7% increase since January.
The data of the decrease in apartment sales, the stabilization of the mortgage market, and reports from developers about a slowdown in the pace of transactions caused estimates for the stabilization of the apartment market. The most influencing factor on the market was the increase in interest rates on mortgages at a rate of about 1%, but the April-May index published in mid-July indicated the continuation of price increases at a rate of 1.4% per month and an increase at a faster rate of about 1.8% in the new apartment market.
The amendment to the law to reduce the linking of apartment prices to the construction input index caused many contractors to announce, at least in the media, the increase in apartment prices by an average of half a percent, and in any case, there are no signs at this stage of discounts or a slowdown in the rate of price increases in the industry, despite additional reports of a decrease in the volume of sales.
The Association of Mortgage Consultants stated: "The supplementary report of the Bank of Israel reveals that the trend of stagnation in the mortgage market continues, also in the number of mortgage portfolios, where there is a slight decrease to 12,024 mortgage portfolios compared to 12,038 the previous year, and there is also a decrease in the average mortgage. This is the continuation of the stoppage in the market resulting from the increase in interest rates. In the coming months, we will see a continued decrease, mainly in the number of mortgages."