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Dec 12, 2022

Proposed Law: freeze interest rates

MK Moshe Gafni (UTJ) has been talking about proposing a law that would freeze interest rates on mortgages for first time buyers. 

According to Kikar, Gafni has now put together his actual plan and has written his law proposal and is busy signing other MKs to it so he can propose it with broad support, which he says he expects to get.

According to Kikar, Gafni is now proposing that when the buyer signs on to a mortgage the interest rate will be set according to the agreement between the buyer and the bank, with the interest rate being influenced by the rate set by the Bank of Israel. Based on that the level of the monthly payments will be determined for the borrower.

With the interest rates increasingly significantly over the past year relative to recent previous years, causing the monthly payments of borrowers to increase significantly.

In order to lighten the financial load for these young couples, Gafni proposes to freeze the interest rate the borrower signs on to at the time of taking the mortgage and it will not be affected by the Bank of Israel's decision to raise interest rates. If the interest rates increase over the period of a year by more than 1% then the banks will be allowed to increase the rates on the relevant mortgages by a maximum of half the increased rate.

Financial experts say that this will not have the effect Gafni expects, as banks will find a way to circumvent the freezing (eg charging higher rates to start with to cover their risk, adding other fees, etc)

We'll see if it passes

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