Israeli Mortgage Data Shows Decline in September Amidst Broader Market Weakness
Translated & summarized from Bizportal by baba
Israeli mortgage lending fell 20.5% in September to 8.67 billion shekels, contrasting with a 12% year-over-year increase in cumulative lending for the first nine months of 2026. Prime rate-linked loans surged 150% as interest rates dropped, while index-linked mortgages hit a five-year low. Experts note that mortgage data doesn't necessarily signal a recovery in new home sales, as it includes older deals and loan rollovers.
The story in 5 lines · by baba
- Israeli mortgage lending dropped 20.5% in September to 8.67 billion shekels.
- Cumulative mortgage lending for the first nine months of 2026 rose 12% year-over-year.
- Prime rate-linked mortgages saw a 150% surge in volume.
- Index-linked mortgages reached a five-year low in market share.
- Experts caution that mortgage data may not reflect new home purchase activity.
The Israeli housing market continues to grapple with weak demand, evidenced by a significant 20.5% month-over-month drop in mortgage lending in September. Banks issued approximately 8.67 billion shekels in mortgages that month, down from 10.9 billion in August and 11.6 billion in July. This decline also marks a 2% decrease compared to September of the previous year.
Despite the monthly dip, total mortgage lending from January to September reached about 88.3 billion shekels, a 12% increase from the same period last year. This figure represents the highest cumulative mortgage volume for the first nine months of the year since 2022, though it remains below the 2022 peak of 96.4 billion shekels. Experts caution that this cumulative figure doesn't solely reflect new home purchases, as it includes financing for deals struck months or years prior, particularly in contractor sales, and also accounts for inter-bank loan rollovers.
A notable shift in mortgage composition is the resurgence of prime rate-linked loans, which surged by 150% year-over-year to nearly 2 billion shekels in September. These loans constituted about 23% of all mortgages, up from 9% a year earlier. This trend is attributed to falling interest rates, with the average prime rate for new loans at 4.15% in September, compared to 5.31% a year prior. However, this comes with the risk of fluctuating monthly payments over the long term, as the average repayment period for prime loans reached 27.3 years.
Conversely, index-linked mortgages have seen a sharp decline, falling 37% year-over-year to 790 million shekels in September. Their share of the total mortgage market dropped to 9.1%, the lowest in five years. While these loans offer a lower initial interest rate (3.31% in September), the principal amount increases with inflation, making them less attractive to borrowers seeking to avoid inflation exposure.
Balloon loans, where principal repayment is deferred, also saw a monthly decrease but remain a significant part of the credit market. Their cumulative volume for the first nine months of the year slightly exceeded last year's figure. While their share has decreased, the overall volume of these loans continues to raise questions about future repayment obligations for borrowers.
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