Shoshelt finances: Why mortgages soar amid economic challenges

The article was written in collaboration with Shoshelt Finance

A report published by the Bank of Israel at the end of June almost leaves no room for doubt. The real estate market is moving from a shuffling trend to a renewed upward trend.

According to the report, it appears that the average number of mortgages taken out last May crossed the one million shekel mark for the first time since the last quarter of 2022. Also, the number of mortgage portfolios reached approximately 7,800, the highest level since 2022.

Thus, despite the war on several fronts and the high interest rates in the economy, it seems that the public in Israel has had its say, and buyers are once again attacking the supply of apartments.

A senior manager at a finance Shoshlet company that specializes in providing advanced and customized financial solutions, explains why at this point in time things are starting to move even more strongly. "Just like in moments of crisis in the past, so too today, in the end the real estate market in Israel remains stable even when the winds are raging around. Since the tree phase in the war in Gaza is about to end, we see how the market is slowly returning to fill gaps, which leads to new price increases.

Other variables should also be taken into account. The impact of the war and the growing anti-Semitism around the world began to bring with it an immigration of thousands of Jews, and most of them arrive with financial ability that allows them to purchase even more than one apartment, so this figure also contributes to what is happening on the ground. Also due to the events of the war, many citizens who live in old buildings without air conditioning rooms are now making a tremendous financial effort to move to safer housing that includes apartments with air conditioning rooms."

A new mortgage

 For those who are facing the purchase of an apartment for the first time and for that need the help of a mortgage, the fear of the step in which they are going to commit to the biggest financial transaction of their lives can be discouraging. 

This fear is mainly due to a lack of familiarity with the variety of routes and options that exist in the mortgage market in Israel that can benefit them. The banks, for their part, do not always present all the most profitable options, which can save tens of thousands of shekels in repayments. Therefore, in recent years there has been a significant need for external mortgage advisors, whose expertise is to represent the customers and ensure that they receive the best terms when taking out the mortgage, just as they do at Shoshlet Finance.

A senior manager of the company puts things in order and explains how even today, when the interest rate in the economy stands at 4.50% and the prime rate adds another 1.5%, it is possible to take out a new mortgage on attractive terms. 

"The interest rate is the main factor that determines the annual payment rate that you will be required to pay on the balance of the loan. The higher the interest rate, the higher the monthly repayments will be. That's why we at the company make sure to divide the mortgage into several paths in order to take advantage of future changes in the interest rate, when each path has the its advantages and disadvantages.

In a track with a variable interest rate, the monthly repayment may increase if the interest rate in the economy continues to rise, but it can also decrease if the interest rate falls, and the forecasts for the coming year indicate possible decreases. To maintain stability, you should combine routes with a fixed interest throughout the loan period, so that you know exactly how much you will pay each month. However, if the interest rates in the market have fallen, you will not be able to benefit from them unless you choose to do a mortgage cycle after several years.

Therefore, before reaching the bank, it is important to draw up a long-term plan that includes other variables besides the level of interest in the economy. For example, the possibility of receiving a higher salary at the workplace, future inheritance, or family planning. Building a work plan as broad as possible will make it possible to build a personalized mortgage mix, which combines stability and financial security alongside the possibility of paying as low a monthly repayment as possible over the years."

Mortgage cycle

Earlier we mentioned the possibility of doing a mortgage cycle, which is basically taking a new mortgage under better conditions. This step can save tens or even hundreds of thousands of shekels and even shorten the mortgage term. However, the timing to carry out a mortgage cycle is critical, and sometimes there are moments when it is simply not worthwhile to cycle the mortgage.

For example, if the loan is on a prime-linked track and the current conditions are the best, there is no point in making a turnover. In addition, if the monthly repayment is low and there are few years left until the end of the loan, even then it is not worth refinancing.

So when is it?

The finance Shoshlet specialist details. "If the interest rates in the economy have dropped significantly since you took out the original mortgage, the mortgage cycle can lower the monthly repayments and reduce the total cost of the loan. If your income has increased or you received an inheritance, the mortgage can be refinanced to better terms, including shortening the loan period or switching to routes with lower interest rate.

If your credit rating has improved, even then you can get better terms and save costs. And finally, if the monthly expenses have changed significantly, the mortgage can be adjusted to the current financial situation of the household, with a transition to a path with lower repayments or a shortening of the loan period."

Loan consolidation

The news about the revival of the real estate market is welcome, as it is expected to drive the economy, create new jobs and more. At the same time, the cost of living continues to burden many, both private individuals and business owners, which leads to a huge demand for credit in the market. This requirement puts many into debt, since in order to survive and keep their heads above water, some of them have already taken out several loans in recent years.

Today, it is easier to get a loan from various sources, which increases the temptation to do so, but it is usually only a temporary solution. As the number of loans increases, the financial hole widens and the risk of foreclosures and bankruptcy intensifies.

"Our short test quickly reveals your financial situation. If you are in a situation of slow but constant economic deterioration, it can be stopped by consolidating loans," explains the expert from Shoshlet Finance. "Loan consolidation unites all loans into one large loan, like a long-term mortgage, with a fixed monthly repayment known in advance and the reduction of interest rates. This is the most effective way to close the debts and start a financial recovery process."

For more information about taking out a new mortgage, refinancing a mortgage or consolidating loans with the help of Shoshlet Finance, send a WhatsApp message or call 074-7418038

The article was written in collaboration with Shoshelt Finance