August Inflation Rise Could Add Thousands to Indexed Mortgage Debt

Israeli consumers with inflation-indexed mortgages and loans should review their loan terms following a 0.7% rise in the consumer price index (CPI) for August. While this monthly increase may seem small, it can translate to thousands of shekels added to the principal of large debts.

For a 500,000 shekel indexed loan balance, a 0.7% CPI increase theoretically adds approximately 3,500 shekels to the principal. For a 1 million shekel balance, this amounts to about 7,000 shekels. This added amount is spread over the remaining loan term and future payments, not as an immediate increase to the monthly installment. The exact impact depends on the loan's indexation date, remaining principal, and specific terms.

Borrowers with mortgages comprising multiple tracks are advised to determine how much of their debt is linked to the index. For instance, prime rate tracks are not directly affected by the CPI. Key price increases in August included fresh vegetables (2.9%), transportation (2.7%), and culture and entertainment (2%). Housing costs rose by 0.6%.

Conversely, fresh fruit prices decreased by 2%, clothing by 0.8%, food by 0.5%, and furniture and household equipment by 0.3%. Despite the monthly rise, the annual inflation rate for the past 12 months remained stable at 1.5%.