Bank of Israel Expected to Cut Interest Rate to 3.5%, Saving Mortgage Borrowers Money

The Bank of Israel is set to announce a quarter-point interest rate cut today, lowering the rate from 3.75% to 3.5%. Concurrently, the prime interest rate will drop from 5.25% to 5%, directly benefiting hundreds of thousands of households with prime-linked mortgages. This decision is largely enabled by inflation stabilizing near the government’s target range of 1% to 3%, giving Governor Professor Amir Yaron room to continue monetary easing.

According to the Association of Mortgage Advisors, this reduction will save an average borrower with a 450,000 shekel mortgage over 25 years about 66 shekels per month. While the monthly savings may seem modest, the total savings over the loan term approach 20,000 shekels, representing a significant reduction in overall mortgage costs. This marks the second rate cut this year, following an earlier reduction by the Bank of Israel.

Meanwhile, the business sector is pressing for a more substantial cut of half a percent. Chen Schreiber, President of the Institute of Certified Public Accountants, criticized the previous quarter-point cut as insufficient and urged Governor Yaron to act boldly to stimulate growth. Finance Minister Bezalel Smotrich has also called for a sharper rate reduction, arguing that the central bank delayed easing measures, harming households and businesses.

Economists predict that if the security and economic conditions remain stable, the Bank of Israel may continue lowering rates over the next year, potentially reaching around 3%. Such moves could further ease mortgage burdens and support a recovery in the real estate market. Alongside the rate decision, the Bank is expected to release an updated economic growth forecast, reflecting the impact of recent conflicts and assessing recovery prospects across sectors.