Archives for March, 2008

financial news

Why you only have two weeks left to refinance

I prefer not to get into highly technical things. My experience is that when I try to explain the way things work too much, people will revert back to the knee-jerk, “So I’ll have a lower rate” reaction. If that’s your reaction, please ignore this post. Still, since the interest rate hit the floor, the questions about refinancing and the “penalty” abound, so I’ll try to answer a couple here. The real “penalty” is actually a capitalization fee—the amount that you have promised to pay the bank but won’t be paying in actuality. The formula used for calculating this leaves you room to earn for only a very short time. This is a snapshot of the published average rates from the Bank of Israel:For...
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financial news

The Refinance Bonanza

We are swamped with refis. We saw this happen last summer, and now it is happening again. The Bank of Israel rate is now 3.25%. It has never been lower. I don’t expect it to remain at this rate for more than a month or so. It has been artificially depressed to weaken the mighty shekel. Copyright AdeKeijzer 2006-57,155 That’s only half of the reason for the refi rush. Last summer when the rates were at 3.5%, a lot of people tried to refi only to learn that they would earn nothing by it. The penalty would eat up whatever profit they had. If you take the time to thoroughly examine the “penalty” formula (it’s actually a capitalization fee), you’ll find that it when...
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forecasts

ובאו האובדים

The papers and radio are full of economic news, so I’ll leave it to them for now. There is a chance that we might see the lowest interest rate in Israel ever in a few weeks, so stay tuned. I think that while the rest of the world is facing tremendous economic difficulties right now, Israel is facing a tremendous opportunity. As I wrote recently, part of the reason for the strong shekel is the faith of foreign banks and corporations in Israel’s economy. Strategically, Israel can decide which economic model we want to adopt to take our economy to the next level: The Cayman Islands model attracts wealthy foreigners as a way to hide money and legally avoid taxes.   The London model...
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dollar

David Klein: Dollar recovery could be swift and sudden

David Klein: Dollar recovery could be swift and sudden The Dollar is at 3.40. Prepare for the implosion.Don’t believe me, read what Dr. Klein said in this interview with the Globes newspaper. Every case is different, and you should always consult your qualified Israeli Mortgage Expert....
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foreign currency

The Shekel Bubble

The US$ is now worth 3.49 NIS (as of this writing, updates here). There are good reasons for this: The US$ is weak worldwide, this isn’t only an Israeli phenomenon. The weakness is the result of too much trade imbalance, mainly with China. There is no such thing as a long-term trade deficit; it’s a populist thing that politicians and media types like to talk about. In the real world, currencies will fluctuate to compensate for long-term deficits. Israel is a good place for foreigners to park their money temporarily. World markets are shaky and Israel’s credit rating is A++. People and corporations with money and no good investments need a place to keep their money until the next investment opportunities come along. Israel’s...
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banks

Should you refinance?

With the recently lowered interest rates, we’ve been getting a lot of questions about refinancing existing mortgages. The universal answer to the basic question does it make sense to refinance is a resounding maybe! It doesn’t always make sense to refinance. Depending on your existing mortgage program, at times you even end up with worse conditions, even though you lowered your rate. This is one of the reasons why we go beyond rate-shopping when planning our clients’ mortgages. Each mortgage plan has different penalty rules. Don’t let the banks fool you, if they tell you that you don’t have any penalties it is because they are calling the charges actualization (היוון) and not early payment penalty. For the mortgage holder it doesn’t make a...
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banks

Cleaning out the cellar

While backing up my blogs, I came across one from almost a year ago where I linked to two different banks giving currency outlooks. Union Bank promised us that the dollar bottomed out. Leumi also thought that the dollar would be strengthening. Union only keeps their latest survey on-line for a week; Leumi’s is still available here. As a special service, I have taken the exchange rates from the same period: Attribution: the Bank of Canada. As of this writing, the current exchange rate is 3.59 (updated financial news). That is about 12% lower than the opinions of the absolute bottom that the banks saw. Only the big guy upstairs really knows what’s going to happen. The rest of us are all guessing. When...
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