Israeli state auditor blames mortgage rules, weak competition for soaring monthly payments

Israel’s state comptroller, Matanyahu Englman, says the country’s mortgage market has become a heavy burden on households, with average monthly repayments rising from about 4,200 shekels in 2019 to roughly 5,800 shekels in 2024 and 2025. That means families are paying about 1,600 shekels more each month, often at the expense of food, education and leisure spending.

Englman places much of the blame on Bank of Israel supervision and on a late 2020 decision to scrap the limit on the prime-rate share of mortgages. The move was presented as a way to lower payments and give borrowers more flexibility, and many households rushed into prime-linked loans. But, according to the comptroller, policymakers did not properly examine the consequences of a sharp future rate hike. When the central bank raised rates to fight inflation, hundreds of thousands of borrowers saw their monthly payments jump, with the average repayment increasing by more than 1,000 shekels in a short period.

The report says the mortgage market kept expanding, reaching about 630 billion shekels by mid-2025, while the average mortgage exceeded 1 million shekels. It also warns about developers’ financing deals, such as 20%-80% offers and balloon loans, which let buyers pay only part of the price at signing and defer the rest until delivery. Englman says these deals create an illusion of affordability and expose buyers to major risk because prices, interest rates and future mortgage conditions may change by then.

Risk indicators have worsened as well. As of July 2025, about 31% of the mortgage portfolio was classified as high risk, up from roughly 20% at the start of 2022. The comptroller also criticizes the market’s weak competition, noting that in 2024 around 63% of borrowers took an offer from only one bank, and in the first half of 2025 about 80% of those refinancing stayed with their existing bank. He further says aid for eligible buyers lagged for years, because the property-value ceiling under Instruction 329 remained at 1.8 million shekels for nine years despite a more than 52% rise in housing prices. Only in February 2026, after the criticism, was it raised to 2.1 million shekels, still indexed to consumer prices rather than home prices, leaving the gap wider for young couples and weaker households.