Rising house prices prompt mortgage restrictions in israel

Rising house prices in Israel have prompted the country to introduce new mortgage restrictions. 

The value of property in Israel increased by 5 per cent in 2012, according to the Bank of Israel, with prices rising 1.6 per cent quarter-on-quarter in the final three months of the year.

The climbing values follow the Bank of Israel's recent lowering of interest rates, making mortgage funding more accessible to buyers. Combined with lowering land sales, the accessibility of lending has pushed prices up, explains Haaretz.

As a result, the Bank has ruled that lenders will need to set aside more capital for loans of higher values.

"These directives are meant to provide a more accurate portrayal of the risk inherent in the banks' portfolios of housing loans, in terms of both capital allocation and bad-debt provisions," banks commissioner David Zaken said.

"This should reinforce the banks' capabilities to absorb losses without reducing their ability to provide funding for the economy's needs."

For more details, read Haaretz' in-depth report.