One of Israel’s largest banks announced on Sunday that it will absorb an anticipated increase mortgage rate interest for around 10,000 mortgage borrowers. The announcement comes on day before the Bank of Israel is expected raise interest rates by 0.25%-0.5%.
The interest rate is currently 3.25%.
Bank Hapoalim, one of Israel’s largest banks, said it made the move to provide relief to people whose monthly mortgage payments stood to increase by hundreds of shekels. For qualifying customers, the prime interest rate will remain at 4.75%.
“As the leading bank in the banking system in Israel, we have made a decision to go through an unprecedented initiative and freeze interest rate increases for over ten thousand customers who, in our estimation, have suffered the highest price increases in recent times,” said Bank Hapoalim CEO Dov Kotler in a statement.
“We are attentive to the difficulties of our customers and are proud to be the first in the banking system to go through this process. We will continue to go towards our customers and provide them with additional solutions in the future,” the statement added.
To qualify, customers must have one property pledged to the bank for the mortgage with a financing rate of over 60%. Monthly payments as of April 1, 2022 must be less than 5,000 shekels for customers whose monthly payments increased by 400 shekels per month or more. Only loans paid without arrears qualify.
Bank Hapoalim did not respond to requests for further comments.
The head of the Knesset Finance Committee, MK Moshe Gafni (United Torah Judaism party) praised the bank’s announcement.
“I welcome Bank Hapoalim’s announcement that it will not raise the expected interest rate and I call on all banks to do the same and not raise the interest rate that burdens borrowers,” Gafni said. “I will continue and will not let up to act on the matter for the benefit of all citizens.”
Israel’s annual inflation rate stands at 5.3%, which is relatively low compared to other countries. As of the end of November, the US inflation was 7.1%, according to the US Department of Labor.
Raising interest rates is a key strategy for central banks to fight inflation. By raising the cost of borrowing money, demand for goods and services is restrained, which prevents prices from inflationary escalation.