Bank of Israel (BOI) Supervisor of Banks Roni Chizkiyahu on Monday announced stricter mortgage regulations, a move approved by BOI Governor Prof. Stanley Fischer, who feels the action is necessary to combat the rising price of real estate in Israel.

In essence, the new regulation permits banks to grant mortgages for up to 60% of the value of a home, a drop from the current 70%. Banks opting to exceed the 60% limit must set aside 0.75% of the credit extended for doubtful loans. Buyers seeking a loan granting over 60% will find interest rates 1% or 1 1/2 % higher, permitting banks to cover additional expenses.

As a result, buyers will require 40 of the equity, a reality that will make purchasing a home nothing more than a dream for many young couples and first time buyers.

This means that one purchasing a home costing NIS 850,000 was previously entitled to a mortgage up to NIS 595,000, but not may only receive NIS 500,000. This will result in a monthly payment of NIS 2,639 instead of NIS 2,503.

Minister of Housing (Shas) Arial Atias hopes to add a clause that would stipulate the new restriction does not apply to those buying a home for a first time.

(Yechiel Spira – YWN Israel)