Social Post: Israel’s Pushes for Mortgage Subsidies Amid Widening Mortgage Defaults

From X:

Israel is facing a pivotal showdown over proposed mortgage subsidies, a scheme led by the National Economic Council and debated at the Prime Minister’s office. The plan would have the 6 largest banks finance relief for mortgage holders in the wake of record profits.

The Bank of Israel published a position paper, shredding the economic rationale of the proposal. “Even after deep examination, the economic logic of this move remains elusive,” the bank noted. Officials warned that such policy “doesn’t exist in any third-world economy” and risks “serious harm to Israel’s standing as a developed market.”

Details revealed by the Council suggest subsidies will be a function of the real increase in mortgage payments between 2022 and 2025 and the value of the asset itself. This relief, to be funded via a windfall tax on bank profits, could cost the banking system an estimated 3 billion shekels.

Mortgage repayments have jumped for upper income brackets but for middle and lower income defaulting on repayments is growing. Policymakers face a choice to either to offer political relief for mortgage holders, or protect Israel’s global reputation as a financially disciplined economy. The Israeli real estate sector, a key driver of growth, will struggle to attract further investments as security concerns persist and economic slowdown prolong.