High Mortgage Volume in June Reflects Old Contracts, Not Housing Market Revival

In June, mortgage loans totaling approximately 11 billion shekels were taken out in Israel, but the Treasury's Chief Economist Department clarifies that this surge does not indicate a new wave of homebuyers entering the market. Instead, the high figures mainly reflect payments on contracts signed years ago, particularly in new apartment transactions where a significant time gap exists between purchase agreements and mortgage disbursement.

The department explains that many deals are "off-plan" purchases, often financed through arrangements like the 20/80 payment plan, where buyers pay a small portion upfront and defer the bulk until property delivery. This has created a disconnect between transaction numbers and mortgage data, especially since mortgage figures are published before transaction data. Between 2020 and 2021, a large gap emerged due to high demand and housing shortages, which narrowed after interest rate hikes but widened again with expanded developer financing incentives.

In 2025, following Bank of Israel restrictions on developer financing, free-market transactions dropped sharply, yet mortgage volumes remained high due to the fulfillment of older contracts. Subsidized housing programs show almost no such gap, highlighting that current mortgage data is not a reliable immediate indicator of market activity.

Mizrahi Tefahot Bank's retail division head, Shabi Shamer, echoed this view at the "Era of Regulation" conference, noting that the current mortgage volume stems from deals signed two to five years ago. She projects similar or higher mortgage volumes through 2028, with any decline in transactions only reflected in loan data after three to four years. Shamer also mentioned that a strengthening shekel helps curb inflation and may lead to interest rate cuts to around 3% by year-end, potentially attracting waiting buyers back into the market.

Moshe Feldmar, VP of Marketing and Business Development at Adith Financing, added that developer financing campaigns and alternative lending solutions have helped young couples and upgraders purchase homes despite high interest rates. He cautioned that while the market remains uncertain and not "boiling," demand is suppressed and could surge once stability signals emerge.