Bank Mortgage Rate Competition Could Save Borrowers Tens of Thousands of Shekels

Mortgage interest rate differences among Israeli banks may seem minor but can accumulate to tens of thousands of shekels over 20 to 30 years. According to June data, the total expected interest rates vary from 4.7% at Bank Leumi to 5.13% at Mizrahi-Tefahot, a 0.43 percentage point gap that significantly impacts long-term mortgage costs.

Financial expert Matanya Kordova illustrates that on a one million shekel mortgage with a fixed, non-indexed rate over 20 years, the monthly payment difference between 4.7% and 5.13% interest is about 237 shekels, totaling roughly 57,000 shekels in additional interest. Extending the mortgage to 25 years increases this gap to 250 shekels monthly and 75,000 shekels overall.

The recent decline in interest rates has shifted the market back to price competition, giving customers greater bargaining power. Banks aiming to grow their mortgage portfolios may reduce margins to gain market share, while larger banks with established customer bases might price differently. The Bank of Israel has cut rates by a quarter percentage point four times in the past year, each cut potentially saving borrowers tens of shekels monthly per 100,000 shekels on prime rate loans. Another rate cut decision is expected soon, with a 50-60% chance.

Kordova emphasizes that as interest rates continue to moderate, competition among banks will intensify, especially benefiting borrowers who compare offers and negotiate. He advises treating a mortgage as a major financial product where small rate differences can translate into substantial savings over decades, warning that those who do not negotiate risk leaving significant money with the banks.