Bethel Finances: Israel bank weighs steps to cool housing mkt-report

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Bethel Finance news:

The Bank of Israel is weighing further measures to bring down housing prices, which have weighed on inflation, Israel's Channel Two television reported. One measure being considered would be to limit mortgages to 50 percent of the value of the property.

The other measure would limit the portion of the mortgage taken at a variable interest rate to 30-40 percent of the property's value. As interest rates continue to rise, the interest paid on variable mortgages also increases, which could create difficulties for mortgage holders to meet their payments. Channel Two said the measures could be unveiled later this month, when the central bank announces its decision on key lending rates for May. "There could be macro-prudential steps in the future. We are weighing them, considering them and formulating them but we weigh and design lots of things that don't necessarily get done," Barry Topf, head of market operations at the central bank, told Reuters on Tuesday. Expectations of continued gains in housing as well as food and energy prices lay behind the Bank of Israel's aggressive half-point rise in short-term interest rates late last month, according to minutes of the discussions. The central bank on March 28 increased the key rate to 3 percent.
Two of four central bank officials had lobbied for a quarter-point rise plus new measures to reduce risks in the mortgage market since loan rates remain low and have contributed to the spike in housing prices. "A step aimed specifically at dealing with that issue would enable the interest rate to be increased less steeply, particularly in light of the risks to the global recovery deriving from the natural disasters, the debt crises in some EU countries, the geopolitical events in the Middle East and North Africa, and the increases in commodity and oil prices," the minutes said.
The other two officials had called for a half-point rise plus "an examination of the need for and the appropriate timing of a macro-prudential measure to follow". Housing prices rose 16.3 percent over the prior year. A Bank of Israel spokesman declined to comment on the report but pointed to the comments made in the minutes.