New regulations set out by the Bank of Israel (BoI), taking effect on Wednesday, are aimed at preventing a brewing real-estate crisis from coming into being, officials said Tuesday. The directives will limit the loan-to-value (LTV) ratio of housing loans, in order to reduce risks to both lending institutions, as well as would-be homeowners, according to Supervisor of Banks at BoI David Zaken. \"In recent years, we\'ve seen negative developments in the housing market and the housing credit market,\" a BoI statement, which noted a \"marked increase in recent years in the balance of housing credit and the increase in home prices in Israel.\" According to the new rules, loan applicants will be divided into three sectors: investors, those seeking home improvement, and first-time home-buyers. Israeli banks, under the new directives, will be prohibited from approving mortgages with an LTV ration of more than 70 percent, with an exception for first-time buyers, who would be allowed up to 75 percent of the value of the apartment. The new guidelines also establish tougher conditions for taking out a mortgage on an apartment as an investment, limiting the LTV to 50 percent. \"Recent trends indicate an increased number of transactions, an increase in the monthly level of mortgages granted and an increase in the investors\' volume of activity, amid low interest rate environment in mortgages,\" the statement said. \"These developments impact the risk level inherent in the bank\' s credit portfolio, as the accelerated increase is liable to include risks to the stability of the banking system, in lifting of the correlation between the housing credit portfolio and the construction and real estate portfolio,\" the bank said. The BoI also noted that many of the deepening financial crises in the world stemmed from loans handed out on terms that did not reflect potential risks. In related news, On Monday, the BoI cut the interest rate for November by 0.25 percentage points to 2 percent, to stimulate economic growth, after months of status quo at 2.25 percent. The decision came \"against the background of the need to provide additional support for economic activity and the absence of inflationary pressures,\" the bank said in a statement. According to the bank, the rate of inflation over the previous year was 2.1 percent, and the country\'s GDP is expected to grow by 3 percent in 2013.