Israelis Risk Financial Stability With Mortgages Exceeding 40% of Income

A significant portion of Israelis seeking to purchase homes are taking on mortgage payments that exceed recommended financial thresholds, placing them at high risk, according to a new analysis. Historically, the Bank of Israel advised that mortgage payments should not surpass 25% of a borrower's income. More recently, banks suggested a limit of 30-33%. However, since 2021, with rising property prices, this figure has climbed to over 40% for many, a level considered dangerous.

This trend is exacerbated by current economic conditions, including job instability in sectors like high-tech, potential layoffs, and reduced average incomes during wartime. These factors diminish a household's repayment capacity, increasing the risk for borrowers.

A study by the Alrov Institute examined the ratio of monthly mortgage payments to net household income across middle-class segments (income deciles six, seven, and eight) in 12 major Israeli cities. The analysis assumed a 70% loan-to-value ratio for a four-room apartment.

The findings indicate that in the second quarter of the year, 70% of first-time homebuyers could not afford a four-room apartment without their monthly payments exceeding 30% of their net income. Except for Beersheba and Haifa, in the other 10 large cities surveyed, residents are either taking on risky loans or are unable to secure financing at all. Specifically, for those in the sixth income decile, mortgage payments constitute 44% of net income, approximately 39% for the seventh decile, and around 35% for the eighth decile.

Despite these concerning trends, the average monthly mortgage payment has decreased compared to the same period last year, falling from approximately 11,416 shekels in the second quarter of 2025 to 10,864 shekels currently. This reduction is most pronounced in cities like Ramat Gan, Bnei Brak, Bat Yam, and Tel Aviv, which have higher property prices. This decrease may reflect a shift towards smaller apartments or a market adjustment rather than a drop in overall property values.