Israel’s State Comptroller says mortgage exposure has risen sharply over the past decade, while the banking supervisor has barely updated its rules. In a report on the mortgage market, he warns that the system is increasingly vulnerable to a subprime-style crisis. Between 2015 and 2025, household mortgage debt more than doubled, from 300 billion shekels to 630 billion shekels. The report says that from 2022 to 2025 the share of high-risk loans rose from about 20% to nearly one-third.
The comptroller defines high-risk mortgages as loans with a loan-to-value ratio of 60% to 75% and monthly repayments equal to 30% to 40% of household income. He says the share of loans in this category climbed from about 20% to 31%, and the share of loans with high repayment burdens rose from 39% to 56%. He argues the Banking Supervision Department did not consider special risk weights for such loans, leaving in place only an instruction from 2014.
The report also criticizes real estate developers’ financing promotions, such as 80/20 and 90/10 payment plans, subsidized contractor loans, and other perks. It says these deals often delay financing until delivery, which can take three to five years. According to Bank of Israel data, by October 2024, 28% of new homes sold by developers were sold through these methods. The comptroller estimates the discounts at 5.3% to 7% of home prices, or 123,000 to 163,000 shekels. He says the banking supervisor does not require banks to limit such sales or conduct proper underwriting at the time of purchase.
The report also says mortgage advisory remains unregulated, even though 61% of borrowers now use an adviser, according to the Bank of Israel. There are an estimated 2,000 to 2,500 mortgage advisers, but no licensing, exams, or internship requirement. The comptroller says poor advice can cost borrowers hundreds of thousands of shekels over a mortgage’s life, and that advisers’ compensation creates conflicts of interest, especially in non-bank mortgages. He urges the Justice Ministry, the Capital Market Authority, and the Bank of Israel to advance legislation that would license advisers, create a registrar, and ban payments from financial bodies.
The Association of Mortgage Advisers said the findings were not new and reflected problems it has warned about for years. Bank Israel rejected the report sharply, calling it “unprofessional,” full of errors and contradictions, and saying the comptroller misread the data by comparing monthly figures with cumulative ones. The bank said it already monitors the market monthly and will continue acting to preserve stability and fairness.
