State Comptroller Says Mortgage Market Risks Have Grown as Oversight Lags

Israel’s mortgage market has become larger, more expensive, and riskier for borrowers in recent years, while regulation has failed to keep pace, according to a special report released Wednesday by State Comptroller Matanyahu Englman. The report examined Bank of Israel, the Capital Market Authority, and other market actors. It says total household mortgage debt hit a record about NIS 630 billion in 2025, more than double the roughly NIS 300 billion recorded in 2015. The average mortgage rose from about NIS 779,000 in 2020 to about NIS 1 million in 2025, and the average monthly repayment climbed from about NIS 4,200 in 2019 to NIS 5,776 by mid-2025.

A central finding is the rapid spread of developer-financed sales schemes, especially the 20/80 and 10/90 models, under which most payment is deferred until delivery. Bank of Israel data show that about 28% of homes sold in bank-financed projects in October 2024 used major payment deferral, and in the months around June 2024 that share reached about 60%. Credit granted through developer-subsidized loans surged from about NIS 453 million in December 2023 to about NIS 8.3 billion in August 2025, a rise of 18.5 times. Englman said these models help developers avoid price cuts and keep sales moving, but increase risk for buyers because future interest rates are unknown and monthly payments may rise. In many cases, full underwriting is not done at signing, which can leave some buyers committed without sufficient financial capacity.

The report also says mortgage risk has steadily worsened. The share of loans classified as high-risk increased from about 20% in January 2022 to about 31% in July 2025, while loans whose repayments equal 30% to 40% of income rose from 39% to 56%. Despite this, the banking supervisor did not regularly review key mortgage limits between 2020 and 2024, including loan-to-value, repayment-to-income, variable-rate exposure, and loan term limits. The comptroller also criticized a 2016 rule intended to help eligible buyers of subsidized apartments, saying the price cap was not reviewed for nine years even as housing prices rose far faster than consumer prices. Bank Israel later said it would update the cap to NIS 2.1 million in February 2026.

On transparency and competition, the report says a 2022 reform failed to achieve its goal of pushing borrowers to compare offers from multiple banks. In 2024, only 37% of borrowers shopped around, down from 44% in 2015-2017, and nearly 98% chose the package offered to them rather than the standardized product baskets designed to make comparisons easier. The market remains highly concentrated, with banks holding about 96% of mortgage debt and four banks controlling about 93% of the market. Nonbank mortgages totaled only about NIS 5.5 billion in 2024, roughly 1% of the market, and the Capital Market Authority lacks detailed data and comparison tools.

The report devotes a major section to mortgage advisers, saying about 61% of borrowers now use one, up from 20% in 2017, but the profession is still unregulated. There is no licensing, exam, formal training, or supervising regulator, and some advisers receive commissions, bonuses, or prizes from institutional and nonbank lenders for referrals. Englman warned that such payments can distort advice. The report also says Arab households face longstanding access problems, with no sufficient government response, while ultra-Orthodox households are hard to assess because informal charitable loans are not reported in credit data. The comptroller did praise Bank Israel’s emergency mortgage relief after the October 7 war and later the Operation Rising Lion crisis, but said no documented lessons-learned process was found afterward. Bank of Israel rejected the report, calling it unprofessional and factually flawed.