State Lost Control of Israel’s Mortgage Market, Auditor Says

State Comptroller Matanyahu Englman published a sweeping report on Wednesday, June 24, 2026, arguing that Israel has lost control of its mortgage market and left homebuyers exposed. The report says regulators do not have a full picture of leverage in the market, consumer protections have weakened, and the government has tried to shift blame for soaring housing costs. Bank of Israel called the report “unprofessional, full of errors and contradictions.”

The report says home prices rose 52% over the past decade, total mortgage debt doubled to 630 billion shekels, and the average monthly repayment climbed from 4,200 shekels in 2019 to about 5,800 shekels today. It criticizes both Bank of Israel and the Capital Market, Insurance and Savings Authority, saying no public body knows the true size of mortgage debt, actual interest rates, or household leverage, while non-bank mortgage lending, estimated at 5.7 billion shekels, is excluded from official data.

The auditor says the non-bank sector expanded almost 900% from 2018 to 2024, from 157 to 1,536 licenses, without proper supervision. In the ultra-Orthodox sector, buyers often combine bank mortgages, community gemach loans, and sometimes non-bank credit, but gemach loans are not reported to credit databases; about 90% of gemachim do not meet licensing rules and 68 operate illegally. In Arab communities, which make up more than 20% of Israel’s population, only 2% of mortgages are issued, with the report citing structural barriers, too few Arabic-speaking advisers, and limited bank branches.

Englman also faulted Bank of Israel for delaying responses to risks, including contractor-financed deals such as 80/20 and 10/90 plans. The volume of such subsidized loans rose from 453 million shekels in December 2023 to about 8.3 billion shekels in August 2025, though Bank of Israel said that comparison was incorrect. The report says the central bank lifted the rule limiting the prime-rate component to one-third of a mortgage at the end of 2020 without examining the consequences, and later failed to explain why its 2022 transparency reform did not improve comparison shopping.

The report says mortgage counseling remains unregulated, even though the share of borrowers using advisers jumped from 20% in 2017 to about 61% in 2025. There are no licensing exams, no binding ethics rules, and no complaints channel, while some advisers receive commissions, prizes, or trips from non-bank lenders in exchange for steering clients. A bill to regulate the field has reached the Knesset Economics Committee but has not yet passed first reading. The report also says a government panel led by Prime Minister’s economic adviser Avi Shmouel? No, Avi Shm? [No, correct name: Avi Shmuel?] found banks were blocking cheaper housing prices, but the conclusion was not based on empirical data and the Finance Ministry and Bank of Israel were excluded from the process.