The Ministry of Finance is promoting a solution that will enable young couples to get a mortgage amounting to a higher percentage of the price, Minister of Finance Moshe Kahlon said at a meeting of the Knesset State Control Committee devoted to the housing crisis. Answering a question whether he would remove equity requirements on mortgages for young couples, Kahlon said, “We must deal with this, it’s on the agenda now, and we’ll provide a differential solution for disadvantaged people.”
Kahlon’s remarks following the proposal of a bill by MK Orly Levi-Abekasis (Yisrael Beitenu) for reducing the equity required in mortgages for young couples from 25% of the property price to 10%. Levi-Abekasis asserts that the Ministry of Finance and the Bank of Israel are ignoring young couples who currently must raise the required equity through high-risk loans at high interest, without their repayment capabilities being examined. Sources close to Levi-Abekasis said that Kahlon himself had said that he took a mortgage amounting to 95% of the apartment price in order to buy his first apartment. Until new Bank of Israel restrictions were imposed three years ago, mortgages of up to 95% of the purchase price could be obtained.
Following criticism by economists, who argued that increasing the financing element would cause higher apartment prices, Levi-Abekasis agreed to restrict the larger mortgages to projects in which the price of apartments was independent of demand, and was not set on the free market, such as the buyer fixed price plan. This proposal, however, is also arousing great opposition from the professional echelon in the Ministry of Finance, who are claiming that it would set a dangerous precedent. In today’s discussion, Levi-Abekasis said that the current situation was impossible for many young couples.
“The Ministry of Finance, the Bank of Israel, and the Ministry of Construction and Housing are ignoring the entire issue of young couples unable to buy an apartment. Many of them can’t raise the equity. Even well-off families are unable to help all their children. It’s like Sophie having to choose which child she should help. What does the state tell them? ‘If there’s no apartment, or you can’t get the equity, then rent.’
“The problem is that one day, there will be thousands of pensioners whose pensions aren’t enough to sustain them. The state is now telling those people to go on renting. We’ll have homeless pensioners here, and what will they tell them then? That they’ll have public housing?” Levi-Abekasis added, “We used to have 95% financing for mortgages. Why shouldn’t we have it now? People who don’t have money borrow from their parents and friends, or from the gray market. The interest on those loans is murderous, and we’re putting them into a trap.”
Published by Globes [online], Israel business news – www.globes-online.com – on October 27, 2015
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