Balloon Mortgages Surge 20% in Israel Amid Rising Mortgage Market

Israel's mortgage market has grown over the past year, but balloon loans have increased disproportionately, rising about 20% annually. By July 2026, the outstanding balance of balloon mortgages reached 29.2 billion shekels, up from 28 billion in April, marking a 1.5% increase in just one month and 4% over three months. Since the start of the year, balloon loans have grown by 2.2 billion shekels, an 8% rise.

Balloon mortgages involve deferring repayment of a significant portion or all of the principal until the end of the loan term, often with only interest paid monthly. In some cases, interest also accumulates and is paid at the end. This structure effectively delays payments for borrowers. For example, a buyer might take a one-million-shekel balloon loan for two years, paying only interest during that time and repaying the full principal at the end.

Between 2022 and 2024, balloon loans increased notably within the 80/20 financing programs, where buyers pay 20% upfront and the remaining 80% upon delivery. Developers often provided balloon loans during the waiting period, covering interest costs themselves. However, this postponement carries risks: if property prices fall, financial situations change, or banks refuse further financing, borrowers may struggle to repay the large balloon sum.

Additionally, the average mortgage amount for Israeli borrowers reached 1.2 million shekels, close to the record 1.3 million shekels set in March. Total mortgage volume in July hit 11.56 billion shekels, the highest since December 2024.