Further to a joint press release by the Bank of Israel and Ministry of Finance on February 14, 2016, the Bank of Israel is publishing today the final version of an amendment to Proper Conduct of Banking Business Directive 329 (Limitations on Issuing Housing Loans).
The amendment applies to mortgages taken out for purchasing homes at reduced prices, in government-subsidized projects such as “Target Price” and “Buyer’s Price”. Based on the amendment, in housing loans extended for the purchase of such homes, a banking corporation may calculate the LTV ratio for the loan based on an assessor’s valuation, rather than on the actual purchase price, provided the buyer is to pay no less than NIS 100,000 as a down payment. In any case, the dwelling value for calculating said LTV (loan to value) ratio is not to exceed NIS 1.8 million.
It should be emphasized that the amendment makes possible the granting of mortgages for such homes at an LTV of 75 percent of the price as evaluated by an assessor, and in actuality greater than 75 percent of the actual price. With that, the LTV permitted in actuality depends on the assessor’s evaluation of the purchase price. As with every loan, the decision on the amount of the loan is subject to the bank’s business considerations.
The Supervisor of Banks, Dr. Hedva Ber, noted that she deems it correct to bring the regulatory directives in line with the new programs promoted by the government, and to assist young couples in a manner that is consistent with the need to limit the risk to customers and to banks.