Bank of Israel Cuts Interest Rate by 0.25%, Lowering Mortgage Payments
The Bank of Israel lowered its interest rate from 3.75% to 3.5%, reducing the prime rate to 5%, which cuts monthly mortgage payments by about 15 shekels per 100,000 shekels borrowed. This move follows low inflation and aims to support economic stability.
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- Bank of Israel cut interest rate from 3.75% to 3.5%, lowering prime rate to 5%.
- Inflation at 1.9% supports the decision, near the 1%-3% target range.
- Monetary policy focuses on price stability, economic support, and market stability.
- Mortgage payments drop about 15 shekels monthly per 100,000 shekels borrowed on prime track.
- A 500,000 shekel mortgage saves roughly 75 shekels monthly; 1 million saves 150 shekels.
- Future rate changes depend on inflation, economy, geopolitical, and fiscal factors.
On July 6, 2026, the Bank of Israel announced a reduction in the benchmark interest rate from 3.75% to 3.5%. Consequently, the prime interest rate, which influences most loans and mortgages in Israel, decreased from 5.25% to 5%. This marks the second consecutive rate cut by the central bank.
The decision was supported by a relatively low annual inflation rate of 1.9%, which is near the Bank of Israel's target range of 1% to 3%. The bank stated that its monetary policy committee focuses on price stability, supporting economic activity, and maintaining market stability. Future interest rate decisions will depend on inflation trends, economic performance, geopolitical uncertainties, and fiscal developments.
According to calculations by the Association of Mortgage Advisors, the 0.25% rate cut translates to a monthly mortgage payment reduction of approximately 15 shekels for every 100,000 shekels borrowed on a prime-linked mortgage over 20 to 30 years. For example, a borrower with a 500,000 shekel mortgage on the prime track would save about 75 shekels monthly, while a 1 million shekel mortgage would yield a 150 shekel monthly saving.
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