hyp-graphic3The Bank of Israel has left the official interbank rate at the all-time low of 0.1%. It has been at this rate for 9 months now. The official BoI rates are available here. No reason to be alarmed but the rate of mortgages continues to rise. This is a very minor increase, the average of all inflation indexed loans is now 2.68, up about half a percentage from  last summer’s all-time low. You can see the official BoI average mortgage rates here.

If you play around with the numbers you’ll get a different number, slightly higher. Presumably this is because the Supervisor of the Banks is employing a weighted-average. We’ll never know because they don’t publish their methodology. Interestingly I saw something in Globes about an academic suing the BoI for not supplying more information.

ד"ר דני בן–שחר / צילום: איל יצהר עתירה: “שהמפקח על הבנקים ייתן מידע על משכנתאות”

I understand the academic need to know. If we can’t play around with the numbers, we can neither qualify the official numbers nor postulate what caused them. However, I think that he is barking up the wrong tree. The problem isn’t with mortgages per se, but with the banking system as a whole.

A few years ago each of the banks had a subsidiary mortgage bank that acted as a daughter or sister company. Leumi had Leumi Mortgage Bank. Poalim had Mishkan. Tefahot was an independent bank specializing in mortgages. Now these are all just units in the mother banks. Instead of competing with each other for business, they are part of a strategy to tie the consumer to a bank.

When the mortgage banks were independent, they wanted to make as much money as possible on a mortgage, making attractive offers to attractive clients, and less attractive offers to less attractive clients. Before they wanted to lend you less money to make sure you are always solvent. Now they want to lend you more to make sure that you will always be in debt.

When considering your mortgage, we have to look at the whole picture. We need to have the mirror picture of what the bank is looking at. We want to minimize your overall debt picture over time. Your mortgage is only part of the picture.

So why has the mortgage rate gone up while there is no increase in interest rates? Supply and demand. Banks issued more mortgages last quarter than at any other time in history, there is a slightly greater demand for mortgages than supply, so the price slightly increases. This trend is likely to continue