Bank of Israel Cuts Interest Rate by 0.25%, Reducing Mortgage Payments

On July 6, 2026, the Bank of Israel announced a reduction in the benchmark interest rate from 3.75% to 3.5%. Consequently, the prime interest rate, which influences most loans and mortgages in Israel, was lowered from 5.25% to 5%. This marks the second consecutive rate cut by the central bank.

The decision was supported by a low annual inflation rate of 1.9%, which is near the Bank of Israel's target range of 1% to 3%. The bank emphasized that its monetary policy aims to maintain price stability, support economic activity, and ensure market stability. Future interest rate decisions will depend on inflation trends, economic performance, geopolitical uncertainties, and fiscal developments.

According to calculations by the Association of Mortgage Advisors, the 0.25% rate cut translates into a monthly mortgage payment reduction of approximately 15 shekels for every 100,000 shekels borrowed on a prime-linked mortgage over a 20 to 30-year term. For example, a borrower with a 500,000 shekel mortgage on the prime track could save about 75 shekels monthly, while a 1 million shekel mortgage would yield savings of around 150 shekels per month.