News Column

Mortgage market remains strong in June

June 24, 2014

By Irit Avissar, Globes, Tel Aviv, Israel



June 24--The Ministry of Finance's housing market prices program is not deterring apartment buyers. According to the banking sources, mortgages are expected to total NIS 4.2-4.4 billion in June, approximately the average for the past 12 months, and slightly more than in June 2013.

Although new apartment purchases have dipped slightly in recent months, judging by the mortgage figures, no dramatic change has occurred in recent months business has continued as usual. Banking sources cautiously predict that no slowdown will take place in the coming months, either. "What we'll see is strong demand for mortgages in the months after the program takes effect," a banking source said.

The sources added that while those eligible for an exemption are treading water at this time, other sections of the public are stepping up their activity. "Those unaffected by the VAT exemption regard this period as an opportunity to obtain better terms from contractors fearful of stagnation before the program goes into effect. Furthermore, we see no decline in activity by investors, who are influenced by the low interest rate and expectations that it will continue on its downward path," noted a senior source in the mortgages sector.

The banks believe that time is required before other measures planned in the housing market, such as a target price, will have any effect. In the bottom line, the public does not yet believe that prices will drop substantially: "Someone who needs to buy an apartment will do it, not wait," the sources said.

The mortgages market has been booming for a long time. The record for mortgages taken was broken last year. The Bank of Israel imposed a series of restrictions on the market involving the customer's leverage and repayment capability and the capital fund that the banks must retain when they grant mortgages. These measures did not cool the market off, but the current composition of the banks' portfolio is considered less risky than in the past. At the same time, the Bank of Israel is still concerned about the state of the market, and the imposition of additional restrictions by it in the future cannot be ruled out.

The Bank of Israel is most alarmed about a scenario combining an interest rate hike with higher unemployment, which would have a negative impact on the customers' repayment capability. On the other hand, the banks assert that no instability was caused in any of the stress tests for simulating a risk scenario.

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(c)2014 the Globes (Tel Aviv, Israel)

Visit the Globes (Tel Aviv, Israel) at www.globes.co.il/serveen/globes/nodeview.asp?fid=942

Distributed by MCT Information Services


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Source: Globes (Tel Aviv)


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