Israeli Households Increasingly Use Loan Refinancing and Payment Plans to Manage Rising Costs

In recent years, tens of thousands of Israelis have chosen to refinance their mortgages, not to reduce their overall debt, but to ease monthly payments by extending loan terms despite rising interest rates. According to Bank of Israel data, over 10,000 mortgage holders refinanced in 2025 with longer repayment periods, reflecting a cash-flow driven strategy to lower monthly installments even at the cost of higher total loan expenses.

This trend extends beyond mortgages into broader consumer behavior. Data from Menora ERN, a subsidiary of Menora Mivtachim, reveals a significant rise in installment payments via checks and direct debits for everyday expenses such as car repairs, dental treatments, and furniture purchases. The average transaction amount paid by check in June reached about 3,230 shekels, a 23% increase year-over-year, while installment transactions via direct debit rose 64% compared to June 2025, with average amounts climbing to approximately 12,900 shekels.

The surge in installment payments reflects a deeper financial challenge for Israeli households, who increasingly rely on spreading out payments to manage cash flow amid inflation and rising living costs. Menora ERN's CEO, Shay Freminger, described this as a "cash-flow survival strategy," where consumers pay differently rather than consume more, aiming to make monthly budgets manageable.

The report highlights a sharp increase in installment usage in sectors like auto repairs (250% increase), dental care (80%), and furniture (32%), as well as a notable rise in northern Israel. While spreading payments is not inherently problematic and often serves as a marketing tool, the growing dependence signals financial strain.

Additionally, the article touches on recent regulatory reforms by the Israeli Ministry of Health that drastically reduced bureaucratic requirements for restaurants, addressing previously excessive regulations that contributed to closures. It also notes ongoing challenges with the betterment levy on property, where government reports have yet to recommend substantial reforms despite recognizing the levy’s role in creating uncertainty and hindering real estate development.