Israel’s banks finally paying more for deposits

In two weeks the Bank of Israel Monetary Committee is likely to announce its seventh rate hike since last April with the interest rate expected to rise from 3.25% to 3.5%. Meanwhile the Bank of Israel has published data on the interest rates that Israel’s banks paid on deposits and charged on loans in November.

In terms of deposits, the banks have had criticism leveled at them over the past few months on the low interest being paid, especially on short term deposits. In November average interest paid on fixed rate deposits closed for three months was 1.39% compared with 1.05% in October. Bank of Jerusalem offered the most attractive fixed interest rate of 2.59% on short term deposits, up from 2.47% in October. Mercantile Discount Bank, First International Bank and Bank Hapoalim were paying 2% in November. Bank Leumi was only paying 1.15% interest, Mizrahi-Tefahot Bank 1.15%, and Bank Yahav 0.7%.

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Meanwhile the public increased the amount of money closed in savings accounts from NIS 50 billion in October to NIS 55 billion in November.

When deposits are extended to up to one year at fixed interest, it seems that the banks have taken Bank of Israel Governor Prof. Amir Yaron’s criticism to heart that they were not passing on higher interest rates to savings deposits.

The average fixed interest rate for one year in November was 3.24%, similar to the two-year rate of 3.26%. Israel Discount Bank and Bank of Jerusalem were paying 3.47% and 3.46% respectively in November and Leumi and Haopalim were paying 3.3%, while Mizrahi-Tefahot was paying only 2% – although Mizrahi-Tefahot was paying 4% interest on deposits of two years or more, well above the average of 3.26%. Hapoalim was offering interest of 3.7% on two years or more in November, followed by Bank Yahav.

On non-fixed variable interest rates (prime) digital bank One Zero and Bank of Jerusalem were offering 2.83% in November. Bank Hapoalim was paying the lowest variable rate of 1.14% in November, the only bank under the average of 1.34%.

Loans becoming very expensive

At the same time loans are becoming more and more expensive, with average loans on the prime track of 8%. Bank of Jerusalem is charging close to 15% on loans while Zero One is charging 5.4%. Average interest on loans in November from Israel Discount Bank was 6.53%, up 0.22% from October, while Mizrahi-Tefahot was charging 8.85%, Leumi 8.26% and Hapoalim 8.03%. 

Published by Globes, Israel business news – en.globes.co.il – on December 21, 2022.

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