To view this  press release as a file, click here

The Bank of Israel closely and frequently follows developments in the housing market, and takes a wide range of steps to provider a response to households’ credit needs while ensuring adequate repayment capacity. This continuous monitoring indicates that there has been an increase in additional housing credit taken on, in particular close to the date of taking out a first mortgage. These actions increase households’ overall debt and have an impact on their repayment ability. Accordingly, the Supervisor of Banks has decided to introduce measures that present the household’s repayment ability more accurately and that strengthen its resilience to the debt’s risks. At the same time, it was decided to make permanent a leniency that was granted on a temporary basis over the past two years, and to continue allowing the taking out of lower cost credit when needed. This balance, created by the steps taken by the Banking Supervision Department, provide a household with sufficient margin for day-to-day conduct as well as financial flexibility for managing future events, planned and unplanned, in the household’s life. These steps are based on professional work, which includes international comparisons.

 

Pursuant to the above, the Supervisor of Banks has decided to carry out the following measures:

  1. To clarify that a calculation of the payment to income ratio (PTI), when taking an additional housing loan in addition to the existing housing loan secured by a pledge of the same property, should examine the monthly payment in respect of the total credit secured by that property.
  2. The maximum amount of the property’s value, established in Section 4a(2) of Proper Conduct of Banking Business Directive no. 329 that the banking corporation can take into account for calculating the limitation on the loan to value ratio (LTV) with regard to a reduced-price housing loan, will be updated in accordance with the rate of increase in the Consumer Price Index (CPI).
  3. To make permanent a temporary relief, according to which a banking corporation may approve a housing loan that is not for purchasing a property right (“all-purpose loan”) even if the LTV exceeds 70 percent, provided that the portion of the loan that exceeds an LTV of 50 percent does not exceed NIS 200,000. This relief was originally granted within the framework of Temporary Directive no. 251 on “Adjustments to Proper Conduct of Banking Business Directives in order to deal with the Swords of Iron War”, from December 28, 2023.

The Supervisor of Banks today published a temporary directive for public comment, which regulates these steps and is attached to this notice.

The Bank of Israel will continue to closely follow and analyze housing market developments, and will take additional steps as necessary.