Bank of Israel proposes changes to mortgage lending

From Yeshiva World

The Bank of Israel on Wednesday, 15 Elul 5773 announced new mortgage regulations, which will go into effect on September 1, 2013. The large number of new mortgages is given as the reason for the bank’s move. In the 12 months through July, more than 56 billion NIS in new mortgages were taken.

00The announcement of the draft regulations contained the highlights, which will set new regulations into place. This includes a mortgage ceiling for a couple that does not permit monthly payments exceeding 50% of the couple’s net earnings. The experts explain this will hit the young couples buying small and modest apartments up to the 1.8 million NIS range hardest. “Housing loans in which the monthly payment is 40-50% of income will be weighted at 100% for the purpose of calculating the capital adequacy ratio,” states the Bank of Israel.

A mortgage may not exceed 30 years, and the variable interest portion of a loan may not exceed 66.7%, that is to say a third of a mortgage must have a fixed interest rate.

Clearly the bank of Israel is trying to avoid a mortgage crisis similar to the one that hit the USA.

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