Israeli Private Debt Soars to Record Highs, Bank of Israel Reports

Dramatic data released by the Bank of Israel for the second quarter of 2026 reveals a continuous expansion in the debt of Israel's non-financial private sector, encompassing both businesses and households. The total debt balance grew by 3.6% in a single quarter, reaching a new record of approximately 2.6 trillion shekels.

The business sector saw a significant 4.2% increase in its debt, totaling around 1.7 trillion shekels. This growth was primarily driven by net debt raising of about 79 billion shekels, largely concentrated in direct bank credit. This credit expansion was mainly directed towards the financial services sector for collateral and securities lending, alongside increased credit for the real estate and construction industries. Consequently, the annual growth rate of business sector debt accelerated to 13.8%, with bank debt surging at an annual rate of approximately 19%.

In parallel, the business sector experienced a notable recovery in the bond market, issuing bonds worth about 33 billion shekels, exceeding the quarterly average of the past year. Half of these funds were raised in June alone, with real estate and construction companies leading the market, accounting for 52% of the issuances. Changes in debt value were also influenced by a 1.3% rise in the consumer price index, which increased indexed debt, and a 5.9% appreciation of the shekel against the dollar, which partially offset foreign currency debt.

Households also saw consistent debt expansion, with their total debt balance climbing to approximately 935 billion shekels, a 2.4% increase within the quarter. A standout figure is the 3.6% jump in non-mortgage consumer debt, reaching about 260 billion shekels, following a slight decrease in the previous quarter. This rise in consumer credit was observed across all lending institutions, including banks, credit card companies, and institutional bodies, pushing the annual growth rate of this debt to 10%.

In the housing sector, household mortgage debt continued to rise steadily by 1.9% to about 675 billion shekels, with the annual growth rate remaining stable at around 7%. This increase was attributed to ongoing new mortgage borrowing from banks, totaling approximately 29 billion shekels for the quarter. The Bank of Israel noted that this pace remained stable in July-August 2026, with a monthly average of about 10 billion shekels.