Mortgage Refinancing Surges in Israel as Interest Rates Begin to Fall

Following a prolonged period of sharp interest rate hikes that burdened households and increased debt levels, Israel is now witnessing a shift as interest rates start to decline. This change is reflected in Bank of Israel data showing a significant rise in mortgage refinancing volumes. In 2025, approximately 69,000 mortgage loans were refinanced in Israel, totaling about 43.6 billion shekels, representing roughly 7% of the banking system's mortgage portfolio, up from an average of 4.5% in previous years. This indicates that more borrowers are actively reviewing and improving their loan terms, viewing refinancing as a legitimate financial tool rather than an exception.

With the onset of falling interest rates, even moderate reductions are encouraging borrowers who previously saw no benefit in revisiting their mortgage conditions. Economic impacts from the ongoing war, especially on self-employed individuals and small businesses, are expected to drive even more borrowers to consider refinancing. Notably, 88% of refinancing occurred within the original lending bank, while only 12% involved switching to a competitor, highlighting both the banks' strong hold and the untapped potential for increased competition.

Non-bank financial entities like Now On are capitalizing on this opportunity by offering more flexible mortgage solutions, including loans fully based on prime rate tracks, which banks limit. This flexibility allows borrowers to benefit more directly from future interest rate cuts, particularly aiding self-employed borrowers who often struggle with the rigid frameworks of traditional banks. These alternative lenders provide tailored, faster, and more creative mortgage structures, expanding borrower options beyond the conventional banking system.

Israel's mortgage market is currently in transition. Although banks still dominate refinancing, the growth of non-bank mortgage providers offering long-term loans with lower equity requirements is poised to intensify competition. As public awareness of these alternatives grows and regulations encourage new entrants, more borrowers are expected to make genuine switches rather than minor renegotiations within existing banks. The mortgage market transformation is already underway, driven by borrowers recognizing their ability to choose.