The recent announcement by the Bank of Israel of an interest rate increase will be one of several expected over the next year, economist and mortgage consultant Be’eri Gurtler Har-Tuv tells Israel National News.
It's part of a long expected process of ultimately raising rates 1.5 to 1.6 percent.
“The whole market has already been expecting it so there was very little effect to that announcement," Har-Tuv says.
How will increasing interest rates impact the Israeli population, specifically those with mortgages?
“People with a mortgage of a million shekels give or take are going to start paying about 50 shekels more per month. The total increase, which were expecting over the course of the next year, is going to be 200 to 300 shekels [per month] for a mortgage of a million shekels.”
Har-Tuv comments that while the interest on bank deposits will also go up, it won't be enough to warrant increasing savings in bank accounts, as the interest accrued will still be quite low, given how historically low the interest rate is.
“Frankly, they’ve been gaining practically zero and even after all the expected increases it will still be gaining practically zero. The absolute clear recommendation is don’t leave your money at the bank. Invest your money somewhere else because even after all the expected wave of increases, we will still be gaining very little.”
The Bank of Israel said in its announcement that the economy is in growth. Har-Tuv sees a wave of inflation coming from the US and Europe, which is why interest rates need to go up.
“The fact that the Bank of Israel is able to increase interest rates in such a way is a testimony to the strength of the Israeli economy. It means the Bank of Israel is not concerned about a wave of unemployment, a wave of foreclosures. They see that the Israeli economy is in a very good place compared to the world.”
How do economists explain the success of the current economy in wake of COVID-19?
“The State of Israel and the government of Israel, both in the previous and current administrations, have dealt pretty well with COVID, both in managing the quarantine, the vaccination process, and also a lot of the Israeli economy is focused on services and high tech and these are professions and incomes that are not severely affected by quarantines, by COVID, which means the Israeli market was able to continue to operate even through the harshest waves of COVID," Har-Tuv explains.