A freeze on mortgage payments causes an increase in the monthly repayment after the freeze ends, as the customer also has to repay the amount frozen. To mitigate the increase in the monthly repayment, Discount will allow the mortgage repayment period to be extended to another 12 months.
The Bank of Israel has allowed banks to freeze their mortgages until the end of the year. However, some banks are already preparing for the day after: Bank Leumi has announced that it will allow a freeze of up to two years on mortgage payments (although this is a freeze on the principal payment and not the interest), while Discount allows a freeze on the entire payment for up to one year.
The mortgage market is one of the weaknesses of banks in the current crisis. These are loans amounting to NIS 380 billion, with their main risk being unemployment. A signal for the state of the industry could be seen when at the height of the crisis 25% of mortgage holders asked to freeze payments. Even today the unemployment figures are dismal, and the fear is that many households will have difficulty paying their mortgages after the freeze period ends. Banks want to avoid a situation of collection processes from customers who will have difficulty meeting their mortgage payments, which can even lead to eviction from their homes, so they prefer to offer alternative offers such as continuing to freeze or recycle their mortgages, until the economy recovers and unemployment falls significantly.
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