Israeli Insurers Challenge Banks in Mortgage Market

Major Israeli insurance companies are entering the mortgage loan market, known as 'mashkanta', challenging the near-monopoly held by banks. Insurers are offering more flexible terms to attract customers, according to the economic publication Calcalist. Harel has established a dedicated structure for this expansion, Menora Mivtachim began offering mortgage loans this year, and Clal Insurance plans to increase its activity in the sector. Phoenix is preparing to enter the market through its credit division, Gama.

Banks currently control approximately 95% of the mortgage market, with around 110 billion shekels in loans issued in 2025 alone. Even a small market share could translate into a multi-billion shekel credit portfolio for insurers. However, insurance companies are not aiming to compete directly with banks on rates for young couples with stable incomes, who typically secure cheaper financing from banks. Instead, they are targeting a niche between banks and traditional non-bank lenders, focusing on creditworthy borrowers with property and positive financial histories whom banks may be unable or unwilling to finance under specific structures.

Harel's financial director, Arik Peretz, stated that competing on rates with banks, which have cheaper funding sources, is not feasible. Harel's advantage lies in its flexibility in structuring loans. The company is set to expand its mortgage activities after the Sukkot holiday, building on an existing portfolio of nearly 3 billion shekels, primarily from 'reverse mashkantas', which already generate over 40 million shekels in annual profit. Harel has also quietly built a portfolio of several hundred million shekels in regular mortgages over the past two years.

Harel's move coincides with a Bank of Israel regulation change effective October 1st, which alters how borrower debt-to-income ratios are calculated for banks. This change will make it harder for borrowers who already have a loan secured by their property to obtain additional credit from banks. Non-bank mortgage providers, including insurers, are not subject to these specific regulations, positioning them as an alternative for some borrowers facing difficulties securing financing from banks. Harel is offering extended repayment periods of up to 40 years, compared to the 30-year maximum in banks. Banks also have stricter loan-to-value ratios for different buyer types.

Other insurers are also expanding. Phoenix is entering the mortgage market via Gama as part of a strategy to broaden credit offerings and create synergy with consumer lending. Menora Mivtachim is working with the IBI credit fund, and Clal Insurance is focusing on reverse mortgages while operating through its non-bank entity Michlol. Migdal, however, remains cautious and is pursuing partnerships rather than direct entry.

Some in the credit industry express concern that the regulatory gap between banks and the less-regulated non-bank sector could shift risks rather than eliminate them. A senior credit industry source warned that the non-bank market operates with less oversight, potentially taking on risks funded by banks or institutional investors.