Israel New Mortgages Jump in March as Benchmark Rate Nears Zero

Israelis took out more mortgages in March than in any other month in at least a year, after the Bank of Israel cut the benchmark interest rate to close to zero.

Banks lent homebuyers 5.6 billion shekels, a 20 percent increase over the previous month, the bank said in an e-mailed statement. In addition to the lower borrowing costs, customers also took advantage of a refinancing program initiated by the government and the central bank, and the increase included about 320 million shekels in rescheduled credit, according to central bank figures.

“There is no question that demand for mortgages is high,” said Ori Greenfeld, chief economist at Psagot Investment House Ltd. in Tel Aviv. “The fact that interest rates are more or less at zero creates demand for mortgages.”

The Bank of Israel has cut the interest rate 13 times since 2011, bringing the benchmark to 0.1 percent at the end of February. The low borrowing costs have fueled demand for housing, with property prices rising about 20 percent during that period. Housing prices were a key issue in last month’s election, with the state comptroller faulting Prime Minister Benjamin Netanyahu’s government for failing to contain the surge in prices, which have doubled in the past eight years.

Israel’s designated next finance minister, Moshe Kahlon, has said addressing the housing crisis would be his top priority, and Israeli newspapers have reported that he is demanding new powers to bring down prices.

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