Why a Post-COVID-19 Mortgage is the Right Move

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When Israel was first hit by COVID-19 the banks were filled with uncertainty like the rest of the economy. Within the first two weeks of the outbreak, Israeli banks raised mortgage rates mainly because it became riskier for the banks to give mortgages. The unemployment rate rose from 4% to 27%, 88% of the workforce was furloughed and 7.2% was fired. The cost of securitization for the financial institutions went up making the cost of capital for banks more expensive.

   As Israel continues to recover from COVID-19 we are seeing slow improvement. Businesses have begun re-engaging the workforce and the level of uncertainty has begun to dissipate. In early May Dr. Hedva Ber, the Supervisor of Banks at the Bank of Israel, sent an official letter to all banks requesting mortgage rates be lowered. By mid-May a few of the main banks followed suit and lowered their rates. For those currently in the process of taking a mortgage, it is recommended to ask your mortgage banker for updated rates before the mortgage is finalized.            

   In 2018, just a few months into his new role as Governor of Bank of Israel, Professor Amir Yaron raised the economy market rates from 0.1% to 0.25%. On April 26, 2020, due to the harsh outcome of COVID-19 on the economy, Yaron lowered that rate back down to 0.1%. The market rate is currently at its lowest level of all time.

   Additionally, Bank of Israel is now allowing homeowners to take out All-Purpose mortgages of up to 70% of the property value. Up until March 2020 this was capped at 50%. As a result, bank loans can be consolidated with a mortgage for up to 25 years at a potentially lower rate. 

   From a real-estate perspective this is the ideal time to buy a house. Due to the dramatic rise in unemployment, there is less eligibility for mortgages, and the financial commitment is too much of a burden for the part of the market. As a result, there are fewer buyers. Although central Israel and more populated city prices have not dropped substantially, room for negotiations has been opened significantly. More sellers than buyers put us in a buyer’s market that lends itself to even better deals to be found, especially in periphery cities in Southern and Northern Israel.

   Despite construction workers being declared essential and the government’s attempt to continue building, many projects have been slowed down or come to a complete halt. Due to this, the supply of new apartments will not meet the demands, and prices will rise.

   Since 2015, prices on homes in Israel have not increased as in the past due to Moshe Kahalon’s courageous Buyer’s Price Program (Machir Lamishtaken). The program cost the government more than initially anticipated and with Yisroel Katz taking over as Finance Minister under the newly formed government the program is expected to change. The discount for young couples will be reduced. This change will have a big long-term impact and price increases are expected.    All of these variables have created a perfect opportunity to buy and mortgage a property now.

 

Please Contact Odiel Malachi for personal, business, and foreign mortgages, refinancing mortgages, consolidating loans, and financial education.

+972-54-535-4726 | odielmalchi@gmail.com

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