Israeli Mortgage Uptake Hits Record High Amid Shifting Loan Preferences

Israel saw a significant surge in mortgage lending in August, with NIS 10.9 billion taken out for housing loans. This brought the year-to-date total to NIS 79.6 billion, a 13.8% increase compared to the same period last year, according to Bank of Israel data. These figures position 2026 to potentially be a record year for mortgage volumes.

Alongside the high lending volumes, there are notable shifts in the types of loans being taken. The average weighted interest rate rose slightly to 4.38% in August, though it remains relatively low after a cumulative decrease since January. Mortgage advisors suggest that the full impact of recent increases in bond yields and bank interest rate offers may not yet be reflected in the official data. Notably, the interest rate for indexed loans with a 10-15 year term saw a jump of over half a percent.

Borrowers are increasingly favoring the Prime loan track, which rose from 22% to 24% of all loans. This shift is attributed to recent interest rate cuts by the Bank of Israel, making the Prime rate more attractive despite its potential for monthly payment fluctuations. This contrasts with a decrease in the share of non-indexed variable rate loans. Experts note a growing preference for fixed-rate loans, as the public appears willing to pay a premium for payment stability and protection against inflation.

Conversely, loans indexed to the consumer price index (CPI) have fallen below 10% of all mortgages for the first time. This indicates a growing borrower caution regarding inflation risk. Even with a lower nominal interest rate, the potential for the principal and monthly payments to increase due to CPI rises is making these loans less appealing, especially as other loan types become more financially attractive in the current interest rate environment.