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Bank of Israel Clamps Down on Mortgage Terms to Avoid Real Estate Bubble

World Property Chennel
Bank of Israel Clamps Down on Mortgage Terms to Avoid Real Estate Bubble - Israel - property mortgage

Like numerous other countries fearing a residential real estate bubble through easy mortgage terms, the Bank of Israel is capping the loan-to-value term of mortgages at 33 percent to 40 percent. The bank is also increasing lenders' provision for mortgages.

Globes, an online real estate financial newspaper published in Rishon LeZion, the fourth largest city in Israel reports the Bank of Israel is set to launch a second round of macro-prudent measures in real estate. The action aims to prevent the creation of a real estate bubble through mortgages caused by the new expansionist monetary policy in Israel.

Last week, the Bank of Israel cut the interest rate for July by 25 basis points to 2.25%.

Globes reports the Bank of Israel is planning two measures. The first is to directly cap the loan-to-value (LTV) of mortgages to 33-40%. The second is to increase the banks' provisions for mortgages hoping to reduce their incentives to grant new mortgages.

Lower interest rates make it more worthwhile to invest in real estate, and less worthwhile to invest in financial assets.


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