Israelis rush to refinance mortgages: reached a record of 4.5 billion shekels
Bank of Israel data reveals a significant trend: the number of mortgage refinancings has reached a peak not seen since 2023. This largely explains the jump in total mortgage volume. Additionally, there is a positive indicator for the Bank of Israel: the number of those in arrears on mortgage payments is decreasing and is at its lowest level this year.
How many people in Israel are in arrears on their mortgage payments? Are these figures dramatic, or can the Bank of Israel downplay the number of those in arrears? The volume of arrears has been rising in recent months, but it must be remembered that the total volume of mortgages is also increasing. Therefore, the Bank of Israel focuses on the percentage of those in arrears, which has long fluctuated between 0.6% and 0.7%.
The central bank does not appear concerned about the level of mortgage arrears. The volume of arrears has jumped to over 4 billion shekels, but as the Governor of the Bank of Israel has previously stated, this represents a marginal percentage of all mortgage borrowers. Nevertheless, this figure began to rise at the end of last year and reached a record high of 4.429 billion shekels in April, representing 0.678% of the total.
In May, this figure rose to 4.448 billion shekels, but the percentage of arrears out of all mortgages fell to 0.675%. In June, the volume dropped to 4.384 billion shekels, despite a significant increase in the volume of mortgage lending (about 11 billion shekels). Consequently, the percentage of mortgage arrears also fell to 0.66%. In July, when the volume of mortgages jumped to 11.056 billion shekels—a 24% increase—the percentage of arrears fell dramatically to 0.63%, with the volume of arrears dropping to 4.239 billion shekels, the lowest figure since the beginning of the year, alongside January.
However, the most significant story in the Bank of Israel's data this month is the number of refinancings. The Bank of Israel's interest rate has fallen significantly in recent months, leading to a new record for the volume of refinancings—just over 4.5 billion shekels (4.507 billion). Borrowers are refinancing because interest rates are lower, which reduces their monthly payments.
Despite the slowdown in the housing market, the volume of mortgages in Israel remains high, largely due to refinancing data. When interest rates fall, people refinance their mortgages, and these are counted as new loans. The rise in mortgage arrears above the 4 billion shekel threshold began in August, and the numbers have not fallen below that level since. Cooling interest rates are prompting people to take out more mortgages or refinance existing ones, which is a key indicator.
It is important to emphasize that "arrears" refers to individuals who have failed to repay their mortgage for 90 days, or three consecutive months. This implies that a family may eventually have to sell their apartment because they cannot meet payments or may be taking out loans to cover overdrafts they are unsure they can repay.
On the other hand, with less than 0.7% of all mortgage borrowers in arrears, the central bank does not consider this a crisis. Once the figure crosses this threshold, it is likely that the bank will tighten conditions for receiving a mortgage.
Why do people fall into arrears? The main reason is the high interest rate. Anyone who took a large mortgage of more than 2 million shekels before April 2022 is likely paying about 2,000 shekels more today. This is significant, and some young couples are unable to cope with the burden.
Note that the data concerns arrears of over 90 days. Couples who are in arrears for one or two months, or those who have frozen their mortgages, are not part of this statistic.
