In many developed countries, the ratio of accumulated mortgage debt to gross domestic product (GDP) is quite high, but Israel presents a surprising statistic: the ratio of mortgage debt to GDP is relatively low compared with most developed countries – 30% as of 2024. Israel’s position is in the lower-middle part of the global table, according to the “Helgi Library” website, well below countries such as Switzerland (131%), UK (115%), Australia (93%), Denmark (83.2%), Canada (62%), and Portugal (47.5%).
What is the importance of the ratio of mortgage debt to GDP?
The mortgage debt-to-GDP ratio reflects the extent of household housing debt relative to the size of the local economy. This is a figure that allows us to assess the level of leverage of the public – when households carry very high levels of debt, they become more vulnerable to external shocks such as a sharp increase in interest rates, a fall in income, or in a scenario of a major decline in real estate prices, borrowers may find themselves with a debt higher than the value of the property – a scenario that materialized in the subprime crisis in the US in 2008.
On the other hand, a low mortgage debt-to-GDP ratio may indicate a more conservative economy, in which the public and banks act cautiously, preferring to avoid “addiction to debt”. This can be a sign of economic resilience, institutional conservatism, or tight regulation. But it is important to stress: a low ratio may also indicate structural limitations such as difficulty for large populations to obtain credit, a requirement for a high equity ratio in relation to the mortgage amount that constitutes a barrier to entry, or a banking system that prefers to grant loans to stronger strata.
How is it that Israel is less leveraged compared with most western countries?
How is it possible that in a country where all real estate discourse is accompanied by a sense of “suffocation,” prices are consistently climbing, and young couples report a heavy financial burden that housing debt remains relatively low?
Firstly, the banking system in Israel is considered conservative. Regulation by the Bank of Israel requires a high minimum equity capital relative to the price of the purchased property, and there are limits on the rate of return from income and close monitoring of the risk level of mortgage portfolios. For example, when purchasing a first and only apartment, the maximum financing rate that the bank is allowed to grant is 75% of the value of the apartment, and the maximum time period in which a mortgage can be taken out is limited to 30 years. Additional restrictions by the Bank of Israel are related to the mortgage mix – at least 33% of the mortgage must be taken in a fixed-interest loan track and no more than 66% of the mortgage must be taken in a variable-interest loan track. The result: Households cannot take on particularly large debts, even if they want to.
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At the same time, the Bank of Israel also monitors the mortgage market from the side of contractors. One recent example is the restrictions imposed by Supervisor of Banks,Dani Hahiashvili on banks’ capital allocations for home construction projects in 20/80-style financing offers, a step designed to reduce them. The Supervisor also set a limit to cut the amount of balloon and outstanding loans that contractors give customers. The Bank of Israel explains, “The increase in risk is also for buyers, for developers, and possibly even for the credit provided by the banking system. This is because these deals may encourage the purchase of apartments by buyers who are uncertain about their ability to complete the transaction.”
What does this have to do with the savings culture of Israelis?
A senior Israeli economist in the economy cites another reason for this figure. In his assessment, the savings culture of Israelis is also what is pushing down the housing debt-to-GDP ratio. “In Israel, the average mortgage taken out by households is usually for 20 to 30 years. Recently, due to high interest rates, it has even been approaching 30 years. In some cases, households will prefer to repay the mortgage before the maturity date because the savings rate in Israel is very high. As soon as a advanced training fund is opened or an inheritance is received, households in Israel will prefer to ‘get rid of the mortgage,'” he explains. He also notes that in Israeli culture, the need to buy a “tangible asset” is ingrained in most households, so quite a few young people and their parents strive to save as much as possible to buy an apartment of their own.
According to this economist, in the rest of the world, the situation is different, and households in other developed countries will often choose to roll over the mortgage, extend it, or buy another property during the life of the mortgage. “In addition, in many countries, it is customary to mortgage assets in order to take out loans for any purpose, such as buying a car or another expense, which can also increase the credit portfolio. In Israel, this is less acceptable, and households would prefer to pay a little more interest and not mortgage their property.”
How does the interest rate on mortgages in Israel compare to the world?
Additional comparisons between Israel’s total debt as a percentage of GDP and other countries reveal mixed data. Thus, according to “The Global Economy” website, the ratio of total household debt (not just mortgages) to GDP stood at 42.3% in 2024, which is relatively good compared with other major developed countries. In Germany, for example, the ratio is 49.9%, in the US 69.2%, in Australia112%, and in Switzerland 125.2%.
Another interesting statistic on “The World Population Review” website measures the ratio between the actual monthly cost of the mortgage and the net income of a household per country. This shows that in 2024 the ratio in Israel stood at 106.6%, compared with the US, for example, where the ratio is relatively low at 29.9%. In Germany, the ratio is 68.3%, in Canada it is 94.7%, and in the UK it is 77.3%.
And what about the average mortgage interest rate?
Here Israel is relatively low in the table of 127 countries around the world published on the data site “Numbeo.”
Taking a closer look at developed countries, while the average mortgage interest rate in Israel (fixed interest, for example, 20 years) is about 5% as of 2024, in the US the interest rate on mortgages is 6.47%, in Canada it is 5.99%, in the UK it is 5.69%, in Germany the average interest rate on mortgages is 3.97%, and in Switzerland the interest rate is 2.41%.
Published by Globes, Israel business news – en.globes.co.il – on September 28, 2025.
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