The Gaza war increases pressure.. The Bank of Israel warns families against increasing their debts

The war on Gaza increased those defaulting on their debt payments (Al Jazeera)

The Central Bank of Israel warned Israeli households against further borrowing, writing in its financial stability report for the second half of 2023 that Israeli banks agreed to defer repayment of nearly 6 billion shekels (about 1.6 billion US dollars) in more than 300,000 loans, it said. Israeli newspaper Globes.

Deferred receivables

The Bank of Israel indicates that about 30% of these loans are allocated to families and companies that postponed repayment as part of the program for those directly affected by the evacuation from their homes (in the Gaza envelope settlements), the killing of members of their families, or who were called up as army reservists.

The Bank of Israel explains that from the point of view of macroeconomic stability, postponing debt repayment allows families and companies to avoid reducing consumption or activities, and reduces the possibility of entering into a state of default, anticipating that the war on Gaza will make it difficult for families to pay their obligations as a result of the decline in average income from work. According to the newspaper.

In this context, the Bank of Israel referred to the loan repayment postponement plan adopted by the banking system, according to which families directly affected by the Al-Aqsa flood operation and the war on Gaza can postpone loan repayment for a period of 3 months without interest or expenses, according to what Globes reported.

Until the end of 2023, the repayment of 75,000 loans (including mortgages and other loans) were deferred, while the repayment of another 150,000 home loans outside the plan were deferred. In total, families deferred repayment of installments by about two billion shekels.

Infographic of Israel's economic losses due to the Gaza Strip war (Al Jazeera)

warning

The Bank of Israel had sent a warning to families against obtaining new loans during this period, and said, “The ability of families to service the debt is reflected in the percentage of the credit balance that is overdue. Even before the war, there was a slight increase in credit arrears (due to the increase in interest that made Repaying loans is hundreds of shekels more expensive, and since the beginning of the war this percentage of total credit has increased somewhat, especially in non-housing credit.”

He continued, "In addition, the rate of credit known as controlled credit (which is feared that the borrower will not be able to repay it) out of the total residential and non-residential credit is 1.2% and 2%, respectively."

He added, "In any case, families whose income is affected above the debt service range (and not as a result of conscription into the Army Reserve, for which the government pays for them), are expected to reduce their consumption, obtain additional credit or use other liquid sources, as “Having access to additional credit during this period may increase the vulnerability of households, especially as long as the economic recovery process from the war is ongoing and prolonged, and as long as interest rates are at a relatively high level.”

Source: Al Jazeera + Israeli press