Israel's Private Sector Debt Hits Record High, Bank of Israel Warns

The total debt of Israel's private non-financial sector reached a record 2.6 trillion shekels in the second quarter of 2026, marking a 3.6% increase from the previous quarter, according to data released by the Bank of Israel. This ongoing rise in indebtedness encompasses both businesses and households.

The corporate sector saw a significant 4.2% increase in debt, reaching approximately 1.7 trillion shekels. This growth was primarily driven by the net raising of about 79 billion shekels in loans, largely through direct bank lending. Lending in the financial services sector, particularly for collateral and securities financing, saw substantial growth. The real estate and construction sectors also continued to experience increased borrowing. Consequently, the annual growth rate of corporate debt accelerated to 13.8%, with bank debt growing by approximately 19% year-on-year.

Corporations also showed renewed activity in the bond market, issuing about 33 billion shekels in new bonds, exceeding the previous year's quarterly average. Companies in real estate and construction accounted for 52% of these new bond issuances. Fluctuations in consumer prices, which rose 1.3%, increased debt tied to the index, while a 5.9% strengthening of the shekel against the dollar partially offset foreign currency debt.

Household debt also continued its steady climb, reaching approximately 935 billion shekels, a 2.4% increase from the prior quarter. Non-mortgage consumer debt saw a notable 3.6% rise to about 260 billion shekels, reversing a slight decline from the previous quarter. This increase in consumer credit was observed across banks, credit card companies, and institutional investors, pushing the annual growth rate of this debt category to 10%.

Mortgage debt for households also grew steadily, increasing by 1.9% to approximately 675 billion shekels, with an annual growth rate of around 7%. This rise is attributed to ongoing new mortgage originations, which totaled about 29 billion shekels during the quarter and maintained a similar pace in July-August 2026, averaging around 10 billion shekels per month.