Israeli mortgage broker Be'eri Gurtler Har Tuv tells Israel National News that the increase in interest rates in Israel will likely continue to impact Israelis with mortgages along with homebuyers in Israel, as well as Americans looking to buy property in Israel.
Har Tuv explains that the increase in rates in Israel is the same as everywhere in the world, including the United States.
“The Central Bank Bank of Israel is trying to fight inflation. They do that by raising the market interest rate and this directly affects the mortgage rates today,” he says. “The average mortgage rate until a few days ago was about five and now we're going to see numbers that are closer to on average 5.3 to 5.5. So we're definitely seeing an increase in mortgage rates in Israel.”
The increase in rates will definitely be felt by people who have purchased apartments and homes.
“Most of the mortgages in Israel have a significant component of variable rates. It is very uncommon in Israel to get mortgages that are fully fixed,” he explains. “Pretty much every mortgage in Israel is affected by this increase of rates, even though part of mortgages in Israel are divided into sections, so the section that is fixed is unaffected.”
“But an average Israeli household that has a million shekel mortgage, which is the average mortgage, can expect an increase of about 100 shekels in their next monthly payment,” he adds.
These families on average are paying over a thousand shekels per month in payments.
When asked where rates are headed, and whether they will continue to climb or level off soon, Har Tuv believes that there may be more rate increases based on the Bank of Israel’s last announcement on interest rates.
“My crystal ball is broken but in the announcement of the increase in rates, the Bank of Israel planted a few sentences that make us think that though this is not the last increase, the next one will probably be the last increase of this current cycle or at least so we can hope,” he says.
He notes that the increase in market rates in the United States seems to be working to bring down inflationary trends.
“The increase in market rates in America started to curb the inflation and the effect is much stronger in America. Also, the increase in the interest rates in America was more significant and the inflation was higher. In Israel, we're also starting to see an effect, the slowing down of the inflation, though at a slower pace than America now.”
Speaking about his time spent in the United States as part of the Israel Real Estate Show in which he came back with insights about the American public’s interest in buying real estate in Israel, Har Tuv comments:
“We traveled to six or seven different communities in New York, New Jersey and Florida. We've seen that the commitment to Israel is unwavering. The desire to plant roots in Israel hasn't changed,” he says.
But he adds, “The affordability of buying real estate in Israel for Americans is becoming more and more of a challenge.”
“I've encountered doctors in Florida earning $200 to 250, 000 a year who told me that they cannot afford to buy real estate in Israel at this stage. Mainly because of the prices in Israel, also the increase in mortgage rates. The combination of these two makes it more challenging than ever before for established American Jews with commitment, with desire, self-identifying as Israel being their second home, who are unable to buy or even if they are able to buy they say the numbers don't add up anymore.”
In terms of investment planning, the issue is predicting how much higher rates will rise.
“Pretty much every real estate expert in Israel assumes that in the medium and long term we will see another increase in market prices for real estate because we have a lot of babies here in Israel,” he says.
“In the short term, the spike in mortgage rates might cause a small decrease in prices of property. So I have seen in addition to those who are priced out or who just can't get something decent for themselves in Israel, I've seen others who can buy but prefer to wait and see what happens with the market over the next year. All this is to say we're not talking about a complete standstill of American Jews buying in Israel, just a larger percentage of people who have interest in buying who don't do so. But still, we've seen dozens of deals since we came back from the tour.”