Israel mortgage was not affected by the mortgage crisis in the United States of America. The main cause of this was the difference in approach taken by the Government and the banks pertaining to the approval of the mortgage loans in the two countries.
When subprime mortgage crisis hit the United States of America, it was fathomed that may be this phenomenon would be carried forward to Israel. However, it was seen that there was no impact of the subprime mortgage crisis on Israel. The main reason for this may be attributed in the difference in mortgage structure in Israel.
The difference lies in the following parameters:
Saving ratios pertaining to households in Israel.
It was noticed that in comparison to the United States of America, approving mortgage loans in Israel was more stringent.It is not uncommon in Israel to have a large number of non repayment in the country.
Studies reveal that between 1999 to 2003, the number of defaulting borrowers increased markedly. The increase to 6.7% from 5.1%. Officials are of the opinion that majority of the borrowers are totally unaware of the outcome of defaulting repayments.
For a short span of time Israel mortgage market encountered the problem of “subprime subclass”. However, the impact was not felt much because the condition of the Israel economy was very sound. 1990 was the period of subprime crisis in Israel when default payments increased several times. Despite the economy being healthy, when globalization set in, small businesses started losing out. This led to increase in rates of unemployment as well as recession set in.
Among the defaulters, it was noticed that 40% of them included couples who were young, immigrants comprised 16% of the defaulters and those who were financially weak constituted 2.8% of the defaulters.
Housing starts in Israel:
It is a well known fact that housing starts are used to denote the health of the housing sector in the country. Housing starts in the country in the year 1999, dropped by 15%(37,210 units) as compared to 1998. It was ascertained this drop in housing starts may cause the prices of real estate to increase and a supply of the houses to decrease.
Last Updated on : 24th August 2013