What is the Prime interest rate as of January 2026?

As of January 2026, the Bank of Israel rate stands at 4.0%, therefore the Prime rate is 5.5% (4.0% + 1.5%). This is a significant decrease from the peak of 6.25% in 2023. The forecast is for continued gradual decreases to 3.5%-3.75% by the end of 2026.

What is LTV and how does it affect approval?

LTV (Loan to Value) is the financing ratio relative to property value. Primary residence: up to 75%, upgraders: up to 70%, investment property: up to 50%. The higher the LTV, the greater the risk to the bank, and the interest rate may be higher. Additionally, if LTV exceeds 60%, banks require more comprehensive mortgage insurance.

What is PTI and why is it important?

PTI (Payment to Income) is the ratio of monthly payment to disposable income. The Bank of Israel limits this ratio to 50% maximum, but in practice banks approve only 35%-40% to leave a safety margin. For example, if your net income is ₪20,000, the maximum approved payment would be approximately ₪7,000-8,000.

What is a bridging loan and when is it used?

A bridging loan is a temporary loan for upgraders who purchase a new property before selling their existing one. The bank places a lien on the old property (up to 50% of its value) and provides immediate funds. The loan is repaid in a single payment when the old property is sold. Risk: If the property does not sell at the expected price/time, there is financial pressure.

What is the difference between Balloon and Bullet loans?

Full Balloon: The borrower pays nothing (neither principal nor interest), and everything accumulates until the end of the period. Bullet/Grace: The borrower pays only monthly interest, the principal does not decrease, and at the end of the period the entire principal is repaid at once. Both models are suitable for investors or upgraders with limited cash flow.

How do I obtain Ministry of Housing eligibility (Teudat Zakaut)?

Eligibility is granted based on a point system calculated from: years of marriage, number of children, number of siblings, military/national service. New immigrants receive bonus points. The interest rate averages 2%-3% (CPI-linked track), and the major advantage: early repayment without capitalization penalty at any time.

How much money does housing eligibility provide?

The eligibility amount ranges from ₪150,000 to ₪600,000 depending on points. A family with 3 children, 10 years of marriage, and full service can receive approximately ₪300,000-400,000. New immigrants (Olim) are entitled to higher amounts.

Is there a penalty for early Prime repayment?

No! This is the major advantage of the Prime track. Since the interest rate changes constantly, the bank does not lose future yield upon repayment, therefore there is no capitalization penalty. This makes Prime ideal for those planning to sell or refinance in the near future.

What is a capitalization penalty (early repayment fee)?

A capitalization penalty is compensation the borrower pays to the bank if they repay a fixed loan before its time. The penalty is calculated as the difference between the original and current interest rates, multiplied by the remaining debt and remaining time. For example: if you took KLZ at 5% and the market is now at 3.5%, the penalty could reach tens of thousands of shekels.

When is it worthwhile to refinance a mortgage?

It is worthwhile when: 1) Market interest has dropped by at least 0.5% from your existing rate, 2) 3+ years have passed since taking the mortgage (so remaining debt is significant), 3) The capitalization penalty is lower than expected savings, 4) You have a remaining balance of at least ₪500,000 (otherwise savings are not worthwhile).

What is a Reverse Mortgage?

A Reverse Mortgage is a product for seniors (60+) where the property owner pledges it in exchange for receiving money (lump sum or monthly annuity). There is no monthly payment, and the debt (principal + accumulated interest) is repaid only upon property sale or the borrower's passing. Uses: retirement financing, helping children, medical expenses.

How much can I borrow for a first apartment?

For a primary residence (first apartment), you can borrow up to 75% of the property value. For example: a property worth ₪1,000,000 → maximum financing of ₪750,000. You must bring 25% equity (₪250,000). Banks also check PTI (payment ratio) and BDI (credit score).

How much can I borrow for an investment property?

For a second property (investment), you can borrow only up to 50% of the property value. For example: a property worth ₪1,500,000 → maximum financing of ₪750,000. You must bring 50% equity (₪750,000). This restriction is designed to cool the investment market and prevent a real estate bubble.

What is the average mortgage interest rate in 2026?

As of January 2026: Prime approximately 5.0% (P-0.5%), Fixed Non-Linked (20 years) 4.5%-4.9%, Fixed Linked 3.0%-3.4%, Variable Non-Linked (every 5 years) 4.3%-4.5%, Ministry of Housing eligibility 2.0%-3.0%. Optimal weighted mix: approximately 4.5%-4.7%.

Are interest rates rising or falling in 2026?

Downward trend! The Bank of Israel has begun lowering interest rates (January 2026: 4.0%, down from 4.5%). Forecast: Continued gradual decreases to 3.5%-3.75% by end of 2026, as part of inflation restraint and economic relief. This is an opportunity window for new borrowers and refinancers.

What is expected with Prime interest rate in 2027?

Conservative forecast: Bank of Israel rate will stabilize around 3.5%, therefore Prime rate will be approximately 5.0% (3.5% + 1.5%). Optimistic forecasts suggest 3.0% (Prime 4.5%). The forecast is based on inflation converging to the 2% target and economic recovery.

How do I build the right mortgage mix?

Recommended mix for 2026: 33% Prime (liquidity + benefit from rate decreases), 33% Fixed Non-Linked (stability), 34% Variable every 5 years Non-Linked (balance). If you have eligibility - always use it instead of linked variable. The principle: risk diversification.

What is a CPI-linked mortgage?

In a linked track, the principal (not the interest) updates monthly according to the Consumer Price Index. If inflation is 3%, the principal rises by 3%. In an inflationary environment (like 2022-2023), this can cause negative reverse mortgage - you pay monthly, but the debt continues to grow. Currently, this track is less recommended.

Should I choose linked or non-linked?

In 2026: Non-linked is preferable! Inflation is stabilizing around 2%, therefore the risk in linked tracks is higher than the potential. Non-linked tracks (KLZ, Prime, MLZ) offer higher certainty without the risk of growing debt. Exception: If linked interest is 1.5%+ lower than non-linked and there is deflation expectation.

What is a Variable Every 5 Years track?

A track where the interest rate is fixed for the first 5 years, then updates according to an anchor (bond yields) + margin. Advantage: Lower interest than KLZ, and option to repay without penalty at exit stations (year 5, 10, 15...). Disadvantage: Uncertainty about the interest rate at the next update.

How does a non-bank mortgage work?

Insurance companies (Harel, Menora, Clal), investment houses, and P2P platforms (Tarya, Blender) provide mortgages to those rejected by banks. Advantage: Flexible underwriting (negative BDI, complex income). Disadvantage: Higher interest rates (on average +0.5%-1.5% from banks). Use: Interim solution for two-three years, then refinance to a bank.

Who provides mortgages to bank-rejected applicants?

1) Insurance companies (Harel Mortgage Plus 80%, Menora), 2) P2P platforms (Tarya - specializes in rejected cases with assets), 3) Foreign banks (UBank), 4) Finance companies (Isracard), 5) RealFix Finance - specializes in bank-rejected cases through financial engineering and credit rehabilitation.

What is a P2P mortgage loan?

P2P (Peer to Peer) is a model where private investors lend to real estate investors, mediated by a digital platform. Borrowers receive financing even with negative BDI or complex income. Investors receive 7%-10% interest. The collateral is a first-degree lien on the property, which reduces risk.

How much can I borrow with a negative BDI (low credit score)?

Through banks: ₪0 (automatic rejection). Through non-bank lenders: up to 50%-60% of property value, depending on the severity of the BDI. Tarya, for example, allows financing even with BDI of -200, but at high interest (7%-9%). RealFix specializes in BDI rehabilitation within 6-12 months and transition to banks.

What is the 70% Temporary Order (Directive 451)?

Since Operation Swords of Iron, the Bank of Israel has allowed borrowers to mortgage existing property up to 70% of its value (instead of 50%) for debt consolidation purposes. The additional 20% is limited to ₪200,000. Purpose: To allow households to consolidate expensive consumer loans (10%-15% interest) into a cheap mortgage (4%-5%).

How do I consolidate debts into a mortgage?

Process: 1) Pledge existing property (up to 70% of its value), 2) Receive money from the bank, 3) Close all expensive loans (consumer credit, credit cards, overdraft), 4) One low monthly mortgage payment. Typical savings: 40%-60% in monthly payment. Critical: Do not accumulate new debts after consolidation.

What happens if I cannot sell my property during a bridge loan?

If the old property does not sell on time, the borrower enters a 'danger zone': 1) Double payment (bridge + new mortgage), 2) Pressure to execute a quick sale at a loss, 3) Request to extend the bridge (at higher interest), 4) In extreme cases - forced sale by the bank. Solution: Aggressive price reduction or temporary rental.

Should I buy property in 2026 or wait?

Strategic answer: 2026 is an opportunity window. Interest rates are falling (cheaper financing), but prices have not jumped back yet. Forecast for 2027: Price increases of 3%-6% due to limited supply and recovering demand. Those who wait may lose twice: both on price and interest (if decreases stop). Recommendation: Buy now if you have eligibility or equity.

Can new immigrants (Olim) get mortgages in Israel?

Yes! New immigrants receive significant benefits including bonus eligibility points, Ministry of Housing subsidized tracks at 2-3% interest, and access to up to ₪600,000 in subsidized financing. The challenge is establishing Israeli credit history - RealFix helps Olim navigate this process and access both bank and non-bank options.

What documents do I need for a mortgage application?

Standard requirements: Teudat Zehut (ID), 3 months salary slips, 12 months bank statements, employment confirmation letter, Land Registry extract (Tabu Nesach), property appraisal, life insurance, and income tax returns if self-employed. For Olim: Teudat Oleh, proof of assets abroad, and translated documents may be required.

Comprehensive Research | 8,000+ Words | 30 FAQs

Complete Mortgage Guide 2026:
Deep Analysis of Interest Rates, Tracks & Forecasts

Name: RealFix Finance
Address: שד' הרצל 1, בניין יוניטרייד, אשדוד, מחוז הדרום, 7745401, IL
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In-depth quantitative analysis of all Israeli mortgage tracks: Prime, KLZ, MLZ, eligibility, and non-bank options. Including historical data 2015-2026, interest rate forecasts 2026-2027, and recommendations for building an optimal mix.

Updated: January 2026

Reading Time: 25 minutes

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Israeli Mortgage Analysis 2026 - Prime, KLZ, Eligibility

5.5%

Prime Rate 2026

4.7%

Average KLZ

75%

Maximum LTV

Max Years

Executive Summary Part A: Regulatory Framework Part B: Mortgage Track Analysis Part C: Historical Interest Analysis Part D: Complex Financing Options Part E: Ministry of Housing Eligibility Part F: Non-Bank Solutions Part G: Optimal Mix 2026 Part H: Forecasts 2026-2027 30 Questions & Answers

Executive Summary

The Israeli mortgage market experienced significant upheaval in 2022-2024 with sharp interest rate increases from 1.6% to 6%. In January 2026, the Bank of Israel lowered the rate to 4.0%, opening a significant opportunity window for both new borrowers and refinancers.

Rates Declining

Expected 3.5% by end 2026

Refinancing Profitable

Savings of tens of thousands

Right Mix

33% Prime | 33% KLZ | 34% MLZ

Key Findings

1. Prime interest rate decreased from 6.25% (2023) to 5.5% (January 2026) - a 0.75% decrease. Forecast: Continued decreases to 5.0% by end of 2026.

2. Non-linked tracks (KLZ, MLZ) have become more attractive due to inflation moderation to 2%.

3. The 70% Temporary Order (debt consolidation) continues to allow increased financing for existing property owners.

4. The non-bank market (Harel, Menora, Tarya) offers solutions for bank-rejected applicants with negative BDI.

Part A: Regulatory Framework

The Bank of Israel sets the rules of the game. Understanding regulatory limitations is the first step in building a proper financing strategy.

LTV (Loan-to-Value) Ratio - Bank of Israel Limits

Property Type	Maximum LTV	Required Equity
Primary Residence	75%	25%
Upgrader	70%	30%
Investment Property	50%	50%
Debt Consolidation (Temporary Order)	70%	30%

PTI (Payment-to-Income) Ratio

Regulatory Limit

Bank of Israel limits monthly payment to 50% of disposable income.

In Practice

Banks typically approve only 35%-40% to maintain a safety margin.

Example: Net income of ₪20,000 → Maximum approved payment: ₪7,000-8,000 per month.

The One-Third Rule

At least one-third of the loan must be in a track where the interest rate is fixed for at least 5 years. Purpose: To protect the borrower from extreme interest rate fluctuations.

Part B: Mortgage Track Analysis

There are 6 main mortgage tracks in Israel. Each is suitable for different situations and profiles. Here is an in-depth analysis of each track.

1. Prime

Track Description

Variable interest linked to the Bank of Israel rate + fixed margin (typically 1.5%). As of January 2026: 5.5%.

Current Interest Rate

P - 0.5% = 5.0%

(Good deal: P - 0.7%)

Advantages

• Zero early repayment penalty
• Maximum liquidity
• Benefit from interest decreases
• Ideal for near-term refinancing/sale

Disadvantages

• Volatility in monthly payments
• Risk from interest rate increases
• Long-term uncertainty

2. Fixed Non-Linked (KLZ)

Track Description

Fixed interest for the entire loan life, with no CPI linkage. Complete certainty in monthly payments.

Current Interest Rate

4.5% - 4.9%

(Depends on term and bank)

Advantages

• Complete payment certainty
• No inflation risk
• Easy financial planning

Disadvantages

• Early repayment penalty
• Higher initial rate than Prime
• No benefit from rate decreases

3. Variable Non-Linked (MLZ)

Track Description

Fixed interest for 5 years, then updates based on an anchor (bond yields) + margin. "Exit stations" without penalty every 5 years.

Current Interest Rate

4.3% - 4.5%

(Lower than KLZ)

Part G: Optimal Mortgage Mix 2026

Recommended Mix for 2026

33%

Prime

Liquidity + benefit from rate decreases

33%

Fixed Non-Linked (KLZ)

Stability + certainty

34%

Variable Non-Linked (MLZ)

Balance + exit options

Key Principle: Risk Diversification

Just as you would not invest all your money in one stock, you should not put all your mortgage in one track. The recommended mix balances liquidity (Prime), stability (KLZ), and flexibility (MLZ) to protect you in any market scenario.

Part F: Non-Bank Solutions

When banks say "no," there are still options. Insurance companies, P2P platforms, and specialized finance companies offer mortgages to those with complex credit profiles.

Insurance Companies

• Harel Mortgage Plus 80%
• Menora Mortgage
• Clal Insurance

Interest: +0.5%-1% above banks

P2P Platforms

• Tarya - Specializes in complex cases
• Blender
• Other P2P lenders

Interest: 7%-10% (higher risk tolerance)

RealFix Specialization

We specialize in securing financing for bank-rejected applicants through financial engineering and credit rehabilitation. Our 98% approval rate comes from knowing exactly which lender will approve each case before we submit.

Ready to Build Your Optimal Mortgage?

Our mortgage specialists will analyze your profile and build a custom mix that maximizes savings while minimizing risk.

+972-72-220-2044

FAQ

30 Questions & Answers About Israeli Mortgages

Everything you need to know about mortgage tracks, interest rates, and approval

Prime is a variable rate track based on the Bank of Israel rate +1.5% (currently approximately 5.5%). Advantages: Zero early repayment penalty, high liquidity. Disadvantage: Volatility in monthly payments. Fixed Non-Linked (KLZ) offers a fixed rate for the entire loan period (currently 4.5%-4.9%), with no CPI linkage. Advantage: Complete certainty in payments. Disadvantage: Early repayment penalty (capitalization fee) if you want to refinance later.

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Legal Disclaimer

The information and simulations presented on this website are for illustrative purposes only and do not constitute a binding offer for credit or financial advice. Credit Approval: Subject to final underwriting, clean credit data (positive credit score), clean banking history, and meeting the threshold requirements of the financing institutions. Interest Rates: The interest rates displayed are estimates only, based on average market data, and may change at any time according to the client's individual risk profile and economic conditions (Bank of Israel interest rate changes / CPI). No Commitment: RealFix does not guarantee loan approval or the terms displayed in the calculator. E&OE.