Prime Mortgage Rate Option Dominates Israeli Housing Loans
Translated & summarized from Calcalist by baba
In October, Israeli housing loans tied to the prime interest rate reached 24.5% of the total, the highest since April 2023, as buyers sought lower rates. Overall mortgage lending rose 7.1% from September to NIS 9.28 billion, with year-to-date lending up 14%. The Association of Mortgage Consultants noted this strength is partly due to past deals and advised borrowers to be cautious.
The story in 5 lines · by baba
- Prime rate mortgages hit 24.5% of Israeli housing loans in October, a high not seen since April 2023.
- Total housing loans in October increased 7.1% from September to NIS 9.28 billion.
- Year-to-date housing loans reached NIS 97.5 billion, a 14% increase compared to last year.
- Variable, non-indexed mortgage options saw their share decrease to 30.2% in October.
- CPI-linked mortgages slightly rose to 9.5% but remain below last year's levels.
In October, the prime rate mortgage option continued its rise in Israel's housing loan market, with apartment buyers leveraging relatively low interest rates. According to Bank of Israel data released Wednesday, loans tied to the prime rate totaled NIS 2.27 billion, accounting for 24.5% of all housing mortgages that month. This marks the highest proportion since April 2023.
Since November 2025, when the Bank of Israel began lowering interest rates, the share of prime-linked mortgages has steadily increased. At the start of the year, this option represented 11.1% of the mortgage market, a significant jump from a low of 6.2% in October 2024. By August, it surpassed 20%, reaching 23% in September.
Concurrently, the share of other variable, non-indexed interest rate options decreased in October from 32.3% to 30.2%. Despite the prime rate's resurgence, its market share remains below the peak of approximately 39% seen in September 2022, before the interest rate hikes began.
Mortgages linked to the consumer price index (CPI) saw a slight increase in October to 9.5% (NIS 879 million), up from 9.1% in September. However, this is still considerably lower than the 15.1% recorded in October of the previous year, following a five-year low in September.
Overall, the mortgage market experienced a 7.1% increase in October compared to September, with banks issuing NIS 9.28 billion in housing loans. This volume, while lower than the May-August peak season, represents a 36.6% rise from October of the previous year, though this comparison is affected by the timing of Jewish holidays. Year-to-date, housing loans total NIS 97.5 billion, a 14% increase over the same period last year.
The Association of Mortgage Consultants commented that the mortgage market shows "strength disconnected from the low volume of transactions in the physical housing market." They attribute this to past deals, including developer financing schemes, where buyers are now taking out mortgages to finalize purchases. The association also noted borrowers are moving away from index-linking towards the prime rate, anticipating future monetary easing despite rising overall interest costs. They advised the public to remain vigilant, carefully assess repayment capacity, and tailor mortgage structures to real needs.
