Household interest expenses jumped by NIS 70b. a year

According to Alex Zabezhinsky, the chief economist of Meitav Investment House, the rise in interest rates in Israel over the past year will result in an increase of 60-80 billion shekels in annual interest expenses for households and companies compared to before the interest rate started to climb. Zabezhinsky is considered one of the most highly regarded analysts in capital markets. The interest rate on mortgages, overdrafts, credit card payments, and commercial loans has increased since April 2022. The forecast for interest payments is based on banks' reports for Q4 2022, which indicates that customers' interest payments amounted to 24 billion shekels compared to approximately 11 billion in Q4 2021 before the interest rate began to rise.

Alex Zabezhinsky, the chief economist of Meitav Investment House, predicts that with the continuation of interest rate increases from the beginning of 2023, the increase in interest payments compared to before it started to rise will amount to 15-20 billion shekels per quarter or 60-80 billion shekels per year.

This represents a "deletion" from funds that could have been used for purchases or investments, amounting to 3.5%-4.5% of GDP. With the decrease in tax revenues and the expected economic slowdown, zero or negative growth is anticipated in Q1 2023. Zabezhinsky criticizes the state budget, claiming that the Treasury's assumptions are unrealistic and that an urgent update is necessary. Meitav anticipates that the government will not meet the deficit target of 1% in 2023, and instead, it will reach 3%. Zabezhinsky also expects a further drop in apartment prices for both new and second-hand apartments. In March, apartment prices decreased by 0.2% according to the index.

Meitav reports that the decrease in sales of newly-built apartments has stabilized in recent months, with a 6% drop in prices. However, sellers of second-hand apartments are reluctant to lower their prices, resulting in a faster decrease in transactions compared to new apartments. As the cost of mortgages rises and the exemption period from the appreciation tax ends, many homeowners who have not sold their current homes will be compelled to compromise and lower their prices.

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