Israel Tightens Mortgage Rules, Limiting Borrowing Power

Israel is set to implement new regulations from the Bank of Israel that will significantly reduce the borrowing capacity for potential homebuyers. Effective October 1, 2026, a new rule will cap the debt-to-income ratio for all housing loans at 50% of net disposable income, a decrease from previous calculations that focused solely on individual mortgage payments. This change is intended to protect borrowers from overextending themselves.

An additional, imminent regulation targets the practice of "loan reversal," where parents act as the primary borrowers for their children's mortgages, often leveraging their higher earning potential to secure better terms. The proposed rule would only allow banks to consider half of the primary borrower's income, potentially disqualifying many young couples and individuals who rely on parental support to qualify for a mortgage. This is particularly impactful for programs like "Price for the Nation" and "Apartment at a Discount," where parents cannot officially co-own the property.

These regulatory shifts are prompting a rush among potential borrowers to secure mortgages before the new rules take effect. Mortgage advisors are warning clients that this may be their last opportunity to obtain loans under current, more favorable conditions. Those unable to secure a mortgage through traditional banking channels may be forced to turn to non-bank credit companies, which are already active in the market and offer loans at significantly higher interest rates.

The article also briefly mentions other real estate news, including a 255 million shekel acquisition of crane company Skyline by Hi-Lift, and ongoing legal disputes between developers and construction companies in Tel Aviv following a fire that delayed a project.