Mortgage Lending Surges in Israel Despite Housing Market Slump, 2026 Set to Break Records

Despite a downturn in Israel's housing market, mortgage lending has surged, with July seeing loans totaling 11.56 billion shekels. This marks the second consecutive month that mortgage volumes have exceeded 10 billion shekels, reaching the highest level since December 2024. Notably, mortgages linked to the consumer price index (CPI) have hit a historic low, constituting only 10% of the mortgage portfolio, down from nearly three times that share two years ago.

The overall monthly average mortgage volume in 2026 is currently 9.8 billion shekels, surpassing the previous peak in 2021 when the average was 9.7 billion shekels per month, despite transaction volumes then being 50% higher than today. A similar average was recorded in 2022, but 2026 has not yet concluded. Experts attribute the decline in CPI-linked mortgages to borrowers' wariness amid recent inflation spikes, economic instability, and government uncertainty, which have made fixed-rate prime loans more attractive.

Nofar Yaakov, chair of the Mortgage Advisors Association, explained that the rising inflation has increased principal amounts on CPI-linked loans, deterring borrowers who now prefer prime-rate options. The association also emphasized that the recent high mortgage figures largely reflect past commitments from 2023 and 2024, particularly deferred payments on contractor deals, rather than a new surge in housing demand.

This shift in mortgage preferences and the evolving financing landscape are reshaping Israel's real estate market dynamics, even as overall housing transactions remain subdued.