Bank of Israel Cuts Interest Rate by 0.25%, Lowering 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, decreased from 5.25% to 5%. This marks the second consecutive rate cut by the central bank.

The decision was supported by a relatively low annual inflation rate of 1.9%, which is near the Bank of Israel's target range of 1% to 3%. The bank stated that its monetary policy committee focuses on price stability, supporting economic activity, and maintaining 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 to a monthly mortgage payment reduction of approximately 15 shekels for every 100,000 shekels borrowed on a prime-linked mortgage over 20 to 30 years. For example, a borrower with a 500,000 shekel mortgage on the prime track would save about 75 shekels monthly, while a 1 million shekel mortgage would yield a 150 shekel monthly saving.