The Bank of Israel plans to intensify pressure on banks, with the aim of reducing the leverage that their clients take on them. Globes has learned that the Bank of Israel recently distributed a draft of a new regulation to banks for their comments, and that it will soon be released for public comment as well. The project includes stricter restrictions on mortgage loans granted “for any purpose.”
The banks classify the loans in question as loans “not for housing purposes, secured by a dwelling.” The Bank of Israel intends to restrict banks in calculating the maximum permissible monthly repayment.
The draft regulations change the method of calculating the monthly installment as a percentage of the family’s total disposable income. Under the new proposal, the total repayments on mortgage loans – whether for purchase, renewal or for any purpose – will not exceed 40% of disposable income. The regulation appears to have been drafted in light of the significant slowdown in home sales last year.
According to Bank of Israel figures, total multi-purpose loans secured on a home made by banks between January and September 2025 amounted to NIS 5.5 billion, much lower than the total of regular mortgage loans in the same period, which amounted to NIS 79 billion. Interest rates on these loans are higher than interest rates on regular mortgage loans – 5.5% on average on index-linked loans and 7% on unlinked loans – but much lower than interest rates on unsecured loans for any purpose, which can reach double digits.
Under the new draft regulations, a person with a monthly disposable income of NIS 20,000 will be able to obtain mortgage loans, including loans for any purpose, for which the total monthly repayment reaches NIS 8,000 per month. Currently, assuming existing loans of NIS 8,000 are repaid, the income balance of NIS 12,000 can be used as the basis for calculating additional loans, but the new regulation will not allow this.
At the Israel Mortgage Advisors Association, the assessment is that the change stems from the fact that the arrears rate on loans for any purpose is double that on regular mortgage loans: 1.2%, versus just 0.6%. But the Bank of Israel may have noticed increasing pressure from the public trying to obtain credit at the cheapest possible rate, using a home as collateral, due to the high interest rate environment.
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“Mortgage loans for any purpose are loans that can be taken out against an existing home to meet different needs,” says a market source. “The Bank of Israel’s action is not entirely clear, but it may be a matter of preparing for a certain decline in the value of homes in the future. If the Bank of Israel believes that there may be a decline in the value of assets in the future, this means a possible decline in the value of the guarantees provided against loans. Banking logic says that if the leverage in the system is, for example, 60%, it could practically rise within a year to 70% due to the value of the leverage. The assets have fallen, so the Bank of Israel is moving in advance to guard against such a possibility.”
Relaxation for the winners of subsidized housing
However, not everything is difficult; There are islands too. People who win the government lottery to buy below-market-rate homes can get mortgage loans of up to 75% of the full value of the home rather than the price they actually pay. Until now, this benefit has been limited to homes priced up to NIS 1.8 million. The draft regulations raise the ceiling to 2.1 million shekels.
Another relief included in the project is to extend the maximum permissible mortgage loan term beyond the current 30 years. In cases where the borrower requests a postponement of repayment, for example due to the War of the Iron Swords, repayment of the loan balance can be rescheduled so that the final payment is made thirty years from the date the loan was granted.
Published by Globes, Israel Business News – en.globes.co.il – on October 28, 2025.
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