More than half of all Israelis struggle to pay mortgages

Conventional wisdoms holds that setting aside up to 30 percent of a family’s monthly income to meet housing costs is acceptable.

By GLOBES/GIL STERN STERN SHLOMO
Sderot building site 311 (photo credit: Noam Bedein)
Sderot building site 311
(photo credit: Noam Bedein)
Fifty-five percent of Israelis “struggle” or “greatly struggle” to pay their mortgages, according to a survey conducted in late July by the Maagar Mochot (Brain Trust) research institute, on behalf of The Association for Community Development.
While the survey answers are subjective, conventional wisdoms holds that setting aside up to 30 percent of a family’s monthly income to meet housing costs is acceptable. 37% of the respondents said that they pay more than 30% of their income on the mortgage and municipal property tax.
The survey found that 54,000 of 1.5 million mortgages were in arrears of at least three months in March (4.6%). Some of the arrears were technical, such as a homeowner forgetting to transfer a standing bank order to pay the mortgage when switching banks.
Yedid estimates that 2,500-3,000 homes were foreclosed each year due to mortgage arrears through 2009.
“The banks tend to report 1,500 foreclosures, but they do not include voluntary foreclosures to save the high eviction cost of NIS 10,000,” Yedid vicepresident Ran Melamed said.
One reason for the low arrears rate is that Israelis tend to first pay the mortgage ahead of other payments.
Israeli banks are also conservative when granting mortgages, rejecting applicants who lack the wherewithal to pay.
Melamed said that Amendment 29 of the Bailiff’s Law, which came into effect in May 2009, requires the banks to pay rent for evictees for 18 months, which averages about $5,000. “Since the amendment came into effect, the banks prefer reaching settlements with mortgage holders rather than evicting them, because where the rent is supposed to fall on the evictee, in practice there is little chance of getting the money from him.” The number of foreclosures is believed to have fallen to 1,500 a year since the amendment came into effect, from over 2,000 beforehand.
As for the tent protest by people unable to make ends meet, Melamed said, “Since the fourth quarter of 2009, we’ve seen a worrying increase in the number of people contacting us who cannot make their mortgage payments, and who are one or two steps away from foreclosure. The growth continued in 2010 and even more in 2011.”