interest rises in Israel

move to prime?

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The interest rate in Israel is again at 4% after the Bank of Israel raised its key discount rate yesterday. Read about it here.

I remember one of my first blog posts here I wrote about how amazing it was that the rate went to 4%. Since then, it went down to 3.5% and has now gone back up to 4%. The difference is that the mortgage banks are way ahead of BoI. Then, the benchmark 20-year mortgage (which is bad for most people) was going less than 4%, now it is approaching 5%.

 

For most people, yesterday's action is meaningless to their personal finances. The banks have already raised their mortgage rates, and will probably continue to do so. Prime rate mortgages are now 5.5%, which is probably better for a lot of consumers than the fixed rate-indexed mortgage. Savings will earn a little bit more. The shekel, currently exchanging at 4.16/$ will probably strengthen a little more.

 

Meanwhile, the situation in Bank Discount continues to worsen. We are recommending to all of our clients to mortgage their homes in different banks.

 

The most important thing is to consult an expert Israeli mortgage advisor. Remember, Discount's lies are taking advantage of the classic rate-fixation with the mortgage consumer. Rates are only a small part of the large mortgage picture.

 

Israeli Mortgages

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Mortgage Israel

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stay away from discount

enjoy.
I posted this today

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Stay away from Discount

See this from YNET:
דיסקונט הבטיח משכנתא זולה אבל לא מצליח לספק אותה -

This is no news for us. Bank Discount has been making promises right and left to people.
Do you know anyone who has actually got one of their promised subsidized mortgages? Neither do we.

We have advised our clients against this program from the beginning. Their so-called subsidy is only 0.3% less than the going rates. Our clients get better rates than this at the real banks when we get them approved anyways.

As I always say, rate is only one parameter of the loan. There are so many other things which are either hidden or not understood which impact mortgages over time. Discount gives you a good rate, but locks you into using their bank for everything at their rates.
Mortgage Israel
Did you compare how much more you will be spending for your banking there? Have you compared the penalties of the mortgages to those of different banks? In general, this is not a bank that I recommend doing business with. Even if they happen to have a good branch that is convenient for you, this is not the place for your mortgage.

Discount is trying to become one of the major banks by offering mortgages as a loss-leader. Loss-leaders are great if you happen to need that particular product. I used to work at a big do-it-yourself homecenter in DC (which was recently reborn as an online tool store; an interesting story about branding and brand retention). Every week we had a different loss-leader. Usually it was something like mulch or manure. Hoping that people coming to buy manure would also buy tools and plants and fertilizer, these staples were sold at a small loss to the store. Some people would wait for the sales and come in early on a Sunday morning and buy 40 sacks of manure!

Many people think that manure and mortgages have a lot in common. If used correctly, both can be used to increase the value of your home. Both start with m. I think that it ends there, but I'll be happy to get comments suggesting more similarities.

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I call into question the rationale of a company who treats their most intricate and expensive product as the loss-leader in order to sell their cheaper products. They want to get you hooked on their mortgages so that they can catch you with their expensive consumer credit options.

My assessment is that they are more reminiscent of a drug pusher than lean-mean marketing machine. We will find you better alternatives for your mortgage.

Mortgages in Israel

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Say little and do even less

Here are another few things that I have been writing

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Say little and do even less

Yesterday Governor Fischer held a press conference.
You can read a summary here:
Central bank: Subprime mortgage crisis does not affect Israeli economy - Haaretz - Israel News

I have written about the subprime lending crisis in the USA since well before it was a crisis. I used to work in that house of cards, and got out shortly before its inevitable collapse.

Throughout the world, this has raised the cost of borrowing. In Israel, we have consistently seen the banks raise interest rates on home loans, despite the fact that the Bank of Israel has raised rates only 0.25%.

In short, Fischer said that he is doing nothing, but everyone should relax, because if anything needs to be done, he will do it. What he means is that our interest rate is still 1.5% less than that of the US, and he can raise that quickly if necessary.

The US is Israel's biggest trading partner, something like 40% of our exports (guestimate). That means that there are significant amounts of money (in terms of Israel's economy) trading hands between the two countries daily, and differences in the interest rate determine where the money will go.

I remain unconvinced by the Gov. Interest rates will rise here in the short-term regardless of what happens.

I'm trying out this digging thing. I don't really understand it, but please digg me anyways. Thanks.

Israeli Mortgage Experts
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Israeli mortgages

Mortgage Israel

 

Testing some Israeli Mortgage stuff

This is a test of Israeli Mortgages.
I hope that it will work well.

Checking comments

this is for checking comments

more inflation

More bad news on the inflatiion

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The CPI (מדד) was announced last night. This month it was 1.1%.

Last month it was 0.7%.

 

Right now, inflation is on course to reach 3.1% for the year. Since the country's budget is based upon expectations of 2-3% inflation, this means that more serious measures will be taken by Bank of Israel to fight inflation. For the consumer this means that interest rates will rise.

 

The banks have already been raising rates. Even though the Governor of the Bank of Israel has raised rates by only 0.25% over the last two months, the banks have raised interest on mortgages in most programs by over a full point during the same period.

 

Governor Frankel will raise interest rates again. As the banks have already raised their rates, we will probably see less action there. Look for something like a 0.5% rise for the official rates and an additional 0.25% on most mortgage programs.

 

This is good news for people who have savings. If you have savings, it would be best to move them into variable rate schemes now.

 

If you are buying a house and your income is in shekels, it is time to consider options other than the traditional fixed-rate indexed loan.

 

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Israeli Mortgages

 

Mortgage Israel

 

 

Even worse then Hefsitba?

In today's NRG:
חפצים ביקרם
There are some cases that are worse than Hefsitba. All of those people will eventually get their properties.

I have said it before, and I will reiterate it now. We recommend that everyone buy properties that are at least 5 years old. Don't believe promises on paper. The so-called "savings" from buying straight from the developer are usually less than the additional costs of your years in limbo.

The CPI will be updated this evening. The consensus is a 0.7% rise. Stay tuned.

Israeli Mortgages
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The Shekel Remains undervalued

another back up

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"The shekel remains substantially undervalued, according to our estimates."

 

The quote that titles this entry is according to this Morgan-Stanley opinion. They think that the Shekel continues to be undervalued. They are also quite critical of our low interest rates. I imagine that they are quite pleased with the recent rising rates, though it is not mentioned.

 

Israel continues to increase its exports at the same time when a growing number of foreigners are investing here. The amount of foreign currency entering the country continues to rise. A good deal of private capital is also finding its way to Israel, with many foreigners buying an Israeli home.

 

What does this mean for Shlomo Homeowner? First of all, it probably means that our economy might be a little more stable than those in the media would let on. I am convinced that interest rates will continue to rise over the next year, but I don't think that any economic disaster is impending. Our industry has learned how to diversify, to balance their domestic investment with foreign factories and daughter companies. We should be confident in our present and optimistic of our future. We might see some fluctuations, but our economy is mature and sound.

As I write these lines, the $-₪ rate is 4.33. This doesn't seem to be consistent with the experts' opinion. If the shekel is undervalued, why has it depreciated against the dollar over the past month? Even more importantly, will it go back down? If our economy is as strong as they think, this number will go down.

 

A few months ago, we were urging our customers with $ linked mortgages to refinance into ₪  based alternatives. Those who listened to us reduced their principal, in some cases by 15-20%, and I couldn't be happier for all who did it.

 

I would never base important investment decisions upon what one analyst thinks. However, if what Morgan-Stanley  thinks is true, then those same people could shave off another good portion of their mortgage by replacing their ₪  based mortgage now with one that is $ based. This would be especially true for those who have high inflation expectations.

 

This is not advice. The issues are intricate, and things such as the LIBOR rate also need to be taken into consideration. Consult an Israeli finance expert, as always is the only real advice that I can give.

 

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Israeli Mortgages

 

Mortgage Israel

this is for the back up blog

we might try some more video later

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Should I still refinance?

 

Is it still feasible to refinance your home mortgage? For some it will be worthwhile, for others not. As with everything else, this can only be answered on a case-to-case basis by an Israeli mortgage professional.

 

If you have a typical inflation-linked fixed-rate shekel mortgage, you will lose money in most instances. The penalty that you will pay is based upon the average interest rate. This rate is the average of the last three months. Since the rates are rising, this means that you will be paying a penalty to a rate which is lower than what you will now receive.

 

Let's say you have 15 years remaining on a 20-year loan and are paying 5.2% interest. The average rates for a similar loan over the past three months were 3.9, 4.0 and 4.1. If you wanted to refinance that loan right now, you would have to pay the penalty on the difference 5.2-4.0, but only get a 4.1% rate!

 

If you are financially better off now than you were five years ago, and can afford a higher payment, or want to pay off a portion of your loan, there are still some things that can be done, but if you wanted to just earn something off of an improved rate, you have to do it while the rates are falling, and that probably won't occur again for some time.

 

If you have an adjustable rate mortgage, call us as soon as possible. The consensus view is that rates will continue to rise in the foreseeable future, and you need to lock-down your low rate now.

 

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Israeli Mortgages

Israel Mortgage

The new welcome message

This is a test of the new welcome message
Israel Mortgage

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Second Video Test

This is a test of using you tube to host the video rather than blogger.
I don't know if it makes any difference.



We'll soon find out.

Trying out video

I'm told that video is the greatest.
More people watch a blog than read a blog.

Here is how it is loaded using draft.blogger.com:

testing

This blog is really for testing out some stuff that I will be using.
I would also like to add all sorts of links like Israel Mortgage
and the such.