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Israeli bank freezes mortgage rates for hard-hit homeowners

REUTERS/Corinna Kern
The move is valid for one year for existing customers that have a mortgage linked to the prime rate

Israel’s Bank Hapoalim will not pass on to customers the central bank’s next increase to interest rates, citing the struggles of homeowners faced with higher mortgage payments amid a broad spike in the cost of living.

The Bank of Israel has raised its benchmark interest rate to 3.25 percent from 0.1 percent since April, resulting in a steep rise in mortgage payments even before a further increase expected on Monday to a 14-year high of 3.75 percent.

Hapoalim, one of Israel’s two largest banks, said customers who have difficulty making mortgage payments will not have to pay extra and that it will leave the prime rate for them at 4.75 percent for now.

The move is valid for one year for existing customers that have a mortgage linked to the prime rate and meet a number of criteria, the bank said.

Hapoalim chief executive Dov Kotler put the number of customers who would benefit from the freeze at more than 10,000.

In November Moshe Gafni, the head of the Israeli parliament’s powerful finance committee, criticised a wave of central bank increases to interest rates and proposed legislation to shield mortgages.

Bank of Israel governor Amir Yaron responded with a warning to lawmakers not to interfere with monetary policy decisions, arguing that “magic solutions” they proposed to blunt the impact of rate hikes would hurt the weakest sectors of the economy.

Gafni on Sunday welcomed Hapoalim’s move and called on other banks to do the same.