Israeli Mortgage Market Surges Despite Housing Slowdown
Translated & summarized from Ice by baba
Israel's mortgage market is experiencing record activity, with year-to-date housing loans up 12% and exceeding 2021-2022 peaks, despite a slowdown in real estate sales. This surge is primarily driven by increased mortgage refinancing due to falling interest rates. While September saw a seasonal dip, the overall trend points to robust loan performance, though delinquency rates have climbed to 0.62%.
The story in 5 lines · by baba
- Israeli mortgage performance is exceeding 2021-2022 peak levels despite a housing market slowdown.
- Mortgage refinancing is a key driver, accounting for 25% of internal and 8.8% of external activity in September.
- Year-to-date housing loans have increased by 12% to 88.3 billion shekels.
- General-purpose loans are increasing in share, while bridging loans are decreasing.
- Mortgage delinquency rates have risen to 0.62% but remain low relative to the total credit portfolio.
Despite a slowdown in Israel's real estate market, mortgage activity is reaching record highs, according to a special report by the Association of Mortgage Advisors for September. While September saw a seasonal 20% drop in mortgage performance to 8.7 billion shekels, largely due to the High Holidays, the daily average for business days showed a moderate increase, suggesting demand remains strong. Year-to-date, housing loan performance has reached 88.3 billion shekels, a 12% increase compared to the same period last year, and the annual pace is exceeding the peak levels of 2021-2022.
The surge is attributed to a significant rise in mortgage refinancing. In September, internal refinancing constituted 25% of total performance, with external refinancing at 8.8%, both at relatively high levels. This trend is driven by decreasing interest rates, prompting individuals to refinance their existing mortgages, which are counted as new loans by the Bank of Israel. This activity inflates the reported figures, masking the underlying market slowdown.
Other trends include a decrease in the proportion of bridging loans, from 12.4% to 12.2% of total performance, and an increase in the share of riskier general-purpose loans, from 4.7% to 4.9%. The Prime track for mortgages also grew to 26% of performance, replacing the fixed-rate track, as borrowers favor options where falling interest rates lead to lower monthly payments.
The average nominal interest rate saw a slight decrease from 4.38% in August to 4.35% in September. However, the projected weighted interest rate continues to rise moderately, reaching 5.09%. The third quarter of 2026 saw mortgage loan performance of 31.1 billion shekels, higher than most quarters since early 2021, with the average loan amount increasing significantly.
Delinquency rates on mortgages have gradually risen from 0.42% in late 2022 to a peak of 0.69% in October 2025, currently standing at 0.62%, totaling approximately 4.2 billion shekels. The Association notes that while rising interest rates and extended loan terms have increased repayment burdens, the delinquency rate remains low relative to the total credit portfolio of about 714 billion shekels.
