Archives for May, 2010

israeli mortgage

Signs of Indecision

Confusion abounds at the mortgage banks as everyone is struggling to understand the Bank of Israel’s new non-regulations. Take a look at my previous post for a link to the great confuser. We have seen this in the past, the banks don’t really know what the regulator wants from them and they are put on hold. Right now the banks are approving loans for 60% or less of the value just as before. Loans that are above 60% will undergo increased scrutiny but still be approved at higher interest rates. My expectation is that EMI will go away, and banks will start approving loans up to a maximum of 75% at higher prices without the private mortgage insurance. For only $1000 a month you...
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How can you raise the interest rate when you don’t want to raise the interest rate?

This question has been bothering the folk over at the Bank of Israel for some time now. It would be healthiest for the country if the official rate of the  Bank of Israel were would like to have an interest rate at around 4%. For the next month, the rate will remain unchanged at 1.5% (the prime rate remains 3%, read the official announcement here). Our inflation rate is around 3.5% (last 12 months), giving us negative effective inflation. However, if the Bank of Israel were to raise rates, we would see another movement of foreign currency into Israel to enjoy the higher rates, again strengthening the Shekel. A strong Shekel is hard for us to maintain with our export oriented economy. There has...
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סוף מעשה במחשבה תחילה

I know that most of the people  who read my blog are those who  are about to take out a mortgage. I want  to give everyone plenty of head’s up: I will be on vacation בין הזמנים. Don’t wait until two weeks  before you need  money. If you need your mortgage before the end of the summer, please contact me now. Remember the all important Real Israeli Mortgage Rule #2. Lots of people at the banks are also taking vacations at this time, and what should be quick and simple procedures take much longer than expected Mortgages are fairly simple and straightforward. However,  there are so many small things that could go wrong along the  way, that it is never a good idea to wait until the last minute....
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inflation

Inflation, Euro, and things to come

The consumer price index for the month of April was 0.9%. If you are interested in reading the full report,  you can do so here. This wipes out all of the deflation that we had this year, and leaves us where we started in January, with the index on 105.7 points. If anyone was wondering, the building materials index is 2.3% for the first four months of the year. (The debt on homes under construction is usually indexed to the cost of building materials.) The Euro continues its freefall. As of this writing the Shekel-Euro exchange rate is 4.66. I remeber just last year all of  the euphoria at the Euro’s tin anniversary, it’s  ascendancy against the dollar, its choice as the new currency of reserve. Two weeks ago I talked...
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foreign investment in israel

Obfuscating Euro, Caustic Dollar

Israel has been admitted to the OECD. You can read the official announcement here: Accession : Estonia, Israel and Slovenia invited to join OECD To be honest, this really doesn’t make a big difference to the average citizen in Israel. When Chile was admitted, it made a huge difference to that country. They were the first South American country to be accepted. As many international investment funds will only invest in OECD members, it meant that a lot of international funds that wanted to diversify into South America couldn’t. Now they all have to invest in Chile. (Brazil will probably be admitted next year.) In Israel, we don’t really have this problem. In fact the last two years have been characterized by too much...
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financial news

Monopoly Money

Two and a half years ago, I wrote that it would be fortuitous to take out a shekel loan linked to the Euro. You can read the full rationale for that statement in the original post. Please note that those predictions were before the so-called financial crisis. Even Monopoly won’t accept these. Soon to be worthless Euros. The few clients who took my advice then have made out like bandits. If you would have taken out a 1,000,000 prime rate loan at the time of my writing you would owe something close to 920,000 for the typical loan. The clients who had the good sense to listen to me now owe only 782,000. Where did the other 138,000 shekels go? They disappeared into the...
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