Harel Insurance Enters Mortgage Market Aggressively, Challenging Banks

Harel Insurance has launched an aggressive expansion into the mortgage market through its new subsidiary, Harel Mortgages, aiming to compete directly with traditional banks. The company is offering non-bank mortgages for property purchases and loans against existing property, operating under the umbrella of "loans for any purpose or housing."

While the initiative has been running quietly without a major advertising campaign, Harel's mortgage terms are notably more flexible than those offered by banks. Harel Mortgages provides loans of up to 7 million shekels, with some products allowing financing of up to 80% of the property's value. This contrasts with banks, which are typically limited to 50% for investment properties and 70% for those upgrading their homes.

Further attracting borrowers, Harel allows deferral of principal payments for up to 10 years, during which only interest is paid. This lowers initial monthly payments but concentrates the principal repayment into later years, increasing borrower leverage. Additionally, mortgages with 60% financing can be extended up to 40 years, exceeding the 30-year maximum typically imposed by banks.

This move marks a significant expansion for Harel, which previously piloted a mortgage program in 2022 and operates Harel 60+ offering reverse mortgages. The company also attempted to enter the credit card market by bidding for Cal but was unsuccessful. Harel is not alone among insurers entering this space; All Insurance already has a mortgage division, and The Phoenix is expected to launch its own soon through its credit company Gamma.

The timing of this expansion is strategic, coinciding with a new Bank of Israel regulation effective October 1st. This regulation will require banks to consider existing loan repayments secured by the same property when assessing new loan applications, potentially making it harder for highly leveraged individuals to secure additional credit. Non-bank lenders like Harel and The Phoenix are not subject to these restrictions, positioning them as attractive alternatives for borrowers facing tighter bank lending conditions.