Bank of Israel Cuts Key Interest Rate Again, Boosting Economy and Housing Market

The Bank of Israel has lowered its benchmark interest rate for the third consecutive time, setting it at 3.25%. This decision was driven by stable inflation expectations, which are currently within the central bank's target range. The move is seen by experts as a positive signal intended to stimulate both the mortgage market and the broader Israeli economy.

The monetary easing is expected to provide some relief to borrowers, particularly those with variable-rate loans. While a dramatic reduction in household financial burdens is not anticipated, the establishment of a consistent trend of cheaper credit is considered significant for the market.

The Israeli real estate sector, which has faced challenges recently, is particularly sensitive to interest rate changes. Despite a substantial inventory of unsold homes, there has been a notable increase in property transactions, with sales of new apartments showing strong activity. Prices have seen moderate movement, with a slight increase in May-June followed by a year-on-year decrease of approximately 1.5%.

In July alone, the volume of mortgage loans issued reached a record 10 billion shekels. Analysts suggest that the combination of lower interest rates, available housing stock from developers, and high demand could lay the groundwork for a gradual recovery in the real estate market in the coming months.