Israeli Mortgage Defaults Decline as Refinancing Activity Rises

Data released by the Bank of Israel for August indicates a continued decrease in both the volume and rate of mortgage payment defaults. Concurrently, there has been an increase in mortgage refinancing, where borrowers switch banks, often to secure better terms. The average mortgage amount taken out in August also saw a reduction, standing at approximately 1.06 million shekels, down from 1.117 million shekels in July and below the year-to-date average of 1.087 million shekels.

The trend of declining defaults persisted in August, with the total volume of defaulted mortgages falling to 4.102 billion shekels from 4.239 billion shekels the previous month, a decrease of about 137 million shekels. The default rate dropped from 0.63% to 0.61% of the total mortgage balance. This marks a continuation of a downward trend since the peak in October 2025, when the default rate reached 0.69%, though over 4 billion shekels in mortgages remain in default.

External mortgage refinancings, defined as borrowers moving their loans between banks, saw an uptick in August, rising to 7.7% from 7% in July. While this is an increase, it remains below the peak of 9% recorded in December 2025. This rise is attributed partly to a reform promoted by MK Yaakov Asher, aimed at simplifying the process of switching banks and increasing competition among lenders.

Representatives from the Association of Mortgage Advisors commented on the data, noting signs of relief for households. They highlighted the ongoing decline in defaults as encouraging and suggested that interest rate reductions are beginning to stimulate activity in the market. The increase in external refinancings was also seen as a positive indicator for competition, empowering borrowers and compelling banks to vie for their business.