Israeli Bank Interest Spreads Reveal Wide Gaps in Loan and Deposit Rates

Israeli banks continue to generate substantial profits from the spread between deposit and lending rates, even as household checking account balances reached 236 billion shekels in August, according to recent financial data. Total household deposits stood at approximately 32.7 billion shekels, while the average interest rate on credit remained significantly higher at 7.93% compared to much lower yields on savings.

Lending Rates and Bank Spreads

The average interest rate for deposits ranging from 6 to 12 months sits at 3.54%, while daily deposits yield a meager 0.72%. In contrast, borrowing costs vary dramatically across financial institutions, with loan interest rates ranging from 3.79% to 16.34%. A median rate comparison reveals significant disparities among lenders operating within the market.

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First Digital Bank (One Zero) offers the lowest median loan interest rate at 6.09%, followed by Bank Massad at 6.25% and Bank Leumi at 6.84%. Meanwhile, Bank Mercantile Discount recorded the highest median loan rate at 11.186%, reflecting a broader risk profile among its customer base. Major institutions such as Bank Hapoalim and Mizrahi Tefahot recorded median rates of 9.05% and 9.97% respectively.

Mortgage Arrears and Cost of Living

High living costs and elevated interest rates have pressured household disposable incomes in recent years, leading to an increase in loan demand. However, mortgage delinquency data for August showed a continued downward trend, with only about 0.6% of borrowers lagging behind on repayments, totaling roughly 4.1 billion shekels. Borrowers who took out large mortgages exceeding 2 million shekels prior to April 2022 faced peak monthly increases of around 2,000 shekels, heavily impacting households reliant on prime-based loans.