The Bank of Israel’s Supervisor of Banks has issued new instructions on mortgages. Mortgages are also being increased for homebuyers, but under strict equity conditions, and without allowing the loan to be spread over more than 30 years, despite demands from commercial banks.
One of the main guidelines of the Supervisor of Banks establishes a temporary relief granted, concerning taking out a loan for any purpose with a mortgage on an existing apartment. If in the past it was possible to take out a loan of up to 50% of the property value, and later the threshold was temporarily raised to 70% – now the relief becomes permanent. However, alongside the relief, a significant limitation was also set: when the loan rate exceeds 50% but remains lower than 70% of the property value, the maximum credit amount will be limited to NIS 200,000.
Mortgage Advisors Association deputy chairman Avi Yusupov welcomes the instruction to permanently raise the loan rate to 70%. He says, “Setting the provision, which allows taking out a loan for any purpose with a mortgage on an existing home up to a financing rate of 70%, subject to a limit of up to NIS 200,000 above a financing rate of 50%, constitutes a significant step that provides regulatory certainty to borrowers, advisors and the banking system, and allows responsible cash flow flexibility for households in a period of high interest rates and ongoing economic pressures.”
Benefits for government subsidized plans
Another relief, initiated by representatives of the Mortgage Advisors Association, concerns buyers in government subsidized programs. Thus, the new directive sets an update of the property value ceiling for the purpose of calculating the financing rate for apartments at a reduced price, which has increased from NIS 1.8 million to NIS 2.1 million, so the maximum mortgage for these properties will increase from NIS 1.35 million to NIS 1.575 million (75% financing from appraisals). At the same time, the regulations require the provision of a minimum equity of NIS 100,000, so that the full amount cannot be financed through a mortgage, but buyers still benefit from a low purchase price and reduced equity requirements.
Along with the relief, the new directive also changes the method of calculating the monthly repayment ratio from the household’s disposable income. According to the updated guidelines, total repayments for housing loans – for purchase, renovation or any purpose – will not exceed 50% of disposable income. However, the instruction stresses that when the repayment rate exceeds 40% of disposable income, banks will be required to assign a risk weight of 100% to the loan – a move that has direct implications for the level of interest. Thus, a mortgage loan of NIS 1 million, on a fixed, unlinked 30-year track, in which the financing rate is low and capital is allocated at 35%, will bear interest of about 4.7%. In contrast, the exact same loan, but with a risk weight of 100%, is expected to bear interest of about 6.7% – a majort gap that sharply affects the monthly repayment and the total cost of the loan.
The Mortgage Advisors Association refers to the decision and notes that it is a step that strengthens risk management in the banking system, improves the level of transparency and creates uniformity in the implementation of the directives among banks. However, the Association warns that the new directive may, in their assessment, lead to an increase in mortgage taking and credit in the non-bank market, at higher interest rates and also make it difficult for consumers to take steps that will reduce the monthly repayment and the cash flow pressure on households.
Subsidy restrictions
Another restriction issued by the Bank of Israel concerns the composition of the mortgage mix and the distribution of the loan between the various interest rate tracks. According to the updated guidelines, exposure to variable interest rate tracks – including tracks linked to the prime rate or the index – will be limited to up to two-thirds of the total mortgage mix, with the minimum exposure to a fixed interest rate track standing at one-third of the mix. The aim of the move is to reduce the risk level for borrowers and reduce their vulnerability to sharp interest rate increases, with an emphasis on periods of economic uncertainty and a volatile interest rate environment.
The Supervisor of Banks is also addressing another major restriction concerning financing operations by contractors, with an emphasis on balloon and subsidized loans, in which the developer bears the interest payments for the buyer. Thus, according to the directive, the scope of this type of loan will be limited to only 10% of all mortgages approved by the bank in that quarter, so that the restriction will be valid until the end of 2026. At the same time, the new directive stresses that banks must to hold higher equity against housing loans they grant the public. In practice, this means that for every mortgage portfolio that is intended to finance rights in real estate, for the purchase of an apartment or property, the bank must allocate additional capital of 1% of the total of these loans. This requirement is intended to serve as a safety net, allowing banks to better deal with possible risks, such as a decline in the value of real estate or difficulties for borrowers in repaying their mortgages.
Further to the guidelines, the Bank of Israel clarifies that banks must carry out an ongoing review of the methods and models they use to set provisions for credit losses on housing loans, and update them if necessary. The Bank of Israel also stresses that banks must ensure that the methods applied comprehensively weigh all factors that may affect the chances of collecting these loans, including the characteristics of the borrowers, market conditions and the economic environment.
Mortgages limited to 30 years
Although previous drafts considered the possibility of easing the mortgage repayments beyond 30 years in exceptional cases – such as a war of attrition, debt settlements with borrowers or the implementation of government aid schemes – the Bank of Israel chose not to include any exceptions. In the final directive, the Supervisor of Banks makes it clear that “a bank will not approve or make a housing loan whose final repayment period exceeds 30 years.”
This means reducing liquidity flexibility, especially for borrowers who are dealing with a temporary drop in income or a sharp increase in monthly repayments. A longer extension was seen by many as a tool for specific relief on repayments, but the Bank of Israel prefers to maintain a conservative threshold to prevent postponing risks for many years to come and to reduce the exposure of banks and the borrowers themselves to heavy long-term liabilities.
Published by Globes, Israel business news – en.globes.co.il – on February 10, 2026.
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