0% Equity: The dramatic change being examined in mortgage assistance

Is the mortgage assistance law returning through a side door after the Ministry of Finance's opposition? In the last day, the Ministry of Construction and Housing decided to establish an inter-ministerial team, in cooperation with the Budget Department and the Accountant General at the Ministry of Finance, to examine criteria for providing assistance within the framework of housing loans.

From our check, it appears that the state does not define the proposal as an attempt to revive the issue of mortgage subsidies, which was rejected by the Ministry of Finance and supported by Prime Minister Benjamin Netanyahu and his economic advisor, Prof. Avi Simhon. However, according to the main points of the proposal presented in a call for proposals, one can assume that what was thrown out the front door of the Ministry of Finance may return ahead of the elections. It has come to the attention of ice that this move received the consent of figures in the Likud, led by Minister of Construction Haim Katz, who is considered close to Netanyahu.

The call for proposals is intended to examine the relevance of existing criteria for providing mortgage assistance and to submit recommendations for updating the scoring system and eligibility conditions. The proposal calls for examining the impact of parameters such as marital status, number of children, military or national service, reserve service, residential areas, and population characteristics; and to make a comparison between mortgage assistance conditions and criteria in other ministry programs.

The team announced that it is inviting the public, professional organizations, public bodies, and non-profits to submit positions, data, and studies on mortgage assistance criteria. The team will examine all responses and, at its discretion, invite parties to present their positions.

Avi Yusupov, Deputy Chairman of the Mortgage Consultants Association, stated: "The Association proposed to the Ministry of Housing to carry out a comprehensive reform in eligibility loans by updating assistance amounts and adapting the mechanism to the reality of today's housing market, similar to the successful model operated by the Ministry of Defense. We believe it is right for the state to return to operating a direct, flexible, and focused assistance tool that will help young couples and first-time homebuyers in a fair manner, while maintaining the independence of the Bank of Israel."

Many believe the main story here is the acute housing distress in Israel, which places an almost insurmountable barrier before young couples in the form of an equity requirement of hundreds of thousands of shekels. This requirement, intended to protect the banking system, ignores the reality on the ground: many families today pay huge monthly amounts for rent that equal or exceed a potential mortgage payment.

Yoel Copeland, manager of the private division at the non-bank credit fund "Ogen", proposed a new mechanism based on "proven repayment ability", which turns the family's current rent amount into an exemption ceiling from equity requirements.

How the outline changes the game:

• For buyers: A family that regularly pays monthly rent (e.g., 5,000 shekels) could translate this payment directly into a mortgage of up to one million shekels over 25 years at 0% equity, increasing the financial financing rate to up to 99%.

• For sellers: Contractors would be paid the full market price for apartments, with the source of funds coming directly from the bank. This creates a focused market for apartments in the one to 1.5 million shekel range, providing an economic incentive for increased construction of accessible apartments without the need for arbitrary government lotteries.

"Replacing the outdated equity barrier with a real repayment ability test will open the door to a first apartment for thousands of families in Israel," Copeland says.