Mortgage Borrowing Surges in June as Israelis Return to Prime Rate Loans
In June, mortgage borrowing in Israel reached approximately 11 billion shekels, marking a 24% increase compared to June of the previous year, according to Bank of Israel data released on Sunday. This figure is one of the highest in recent years, surpassed only by December 2024 with 13.8 billion shekels and December last year with 11.2 billion shekels. The strong June performance suggests a robust summer mortgage market, potentially breaking the previous summer record of about 20 billion shekels set in July-August last year.
The mortgage market's current strength is notable given the recent interest rate hikes and the economic impact of the recent conflict, which had initially caused a temporary slowdown. However, much of the mortgage activity reflects older real estate transactions, particularly those involving "contractor loans" where the mortgage is taken at the end of construction rather than in stages.
For the first half of the year, total mortgage borrowing reached around 57 billion shekels, a 14% increase from the same period last year and the highest since 2022, when a record 69 billion shekels was borrowed in the first six months.
Bank of Israel data also shows a recovery in the prime-linked mortgage segment. In June, about 2 billion shekels in mortgages were linked to the prime rate, representing 18% of total mortgages, up from just 9% in June last year. Although this is still below the 39% share seen in June 2022 before interest rate hikes, it indicates a gradual return to prime rate loans as interest rates have recently been lowered.
Avi Yosupov, Vice Chairman of the Mortgage Advisors Association, noted that June's data reflects a gradual shift in public behavior, with more families engaging in the mortgage market and showing increased confidence in the new interest rate environment. He emphasized that mortgage data often reflects deals made months earlier, especially in new housing, but the changes in mortgage mix and volume suggest growing public trust.
