Israel Mortgage Surge Beats New Bank Regulations as Borrowers Rush to Secure Loans
Israel's mortgage lending surges toward 120 billion shekels annually as borrowers rush to beat strict new Bank of Israel PTI caps and limits on parental loan backing.
Israel's mortgage market is booming, with banks issuing 80 billion shekels in housing loans between January and August, putting the annual pace on track to hit 120 billion shekels. This surge rivals the record highs seen in 2021-2022 when interest rates were near zero. Beyond aggressive financing campaigns, a frantic race against the clock is underway as borrowers rush to secure loans ahead of sweeping regulatory changes by the Bank of Israel.
The Double Threat to Borrowers
Starting October 1, 2026, new central bank regulations will significantly curtail borrowers' ability to take out mortgages or limit their borrowing amounts. The Bank of Israel is overhauling the rules regarding the payment-to-income (PTI) ratio, defined as the proportion between monthly repayments and a household's net disposable income. Under the updated framework, banks are mandated to conduct comprehensive checks ensuring that total housing loan repayments across all financial institutions do not exceed 50% of income. In practice, regulatory capital requirements will push the effective cap down to 35%-40%.
Simultaneously, a second regulatory threat looms regarding what is professionally known as "borrower reversal" or mortgaging property for the benefit of another. This common practice allows parents to act as primary borrowers for their children's property purchases, leveraging their higher earning capacity to secure cheaper mortgage rates instead of expensive "all-purpose" loans. According to a draft proposal circulated by the central bank, lenders may soon only be permitted to factor in half of the primary borrower's income, effectively pricing out numerous families.
Mortgage adviser Jonathan Berliner explains that while parents can sometimes join transactions as direct co-buyers to bypass restrictions, programs like "Buyer's Price" (Mehir le-Mishtaken) prohibit this, leaving borrower reversal as the sole viable path. The impending restrictions heavily impact young couples, continuing sons in agricultural moshavim, and families building homes in the Arab sector.
Construction Contractors Take the Spotlight
Amidst the financial squeeze, recent market deals highlighted the resilience of construction execution contractors. High Lift, a construction site hoist company, acquired a 75% controlling stake in crane company Sky Line for 255 million shekels. Sky Line closed 2025 with revenues of approximately 172.4 million shekels and a net profit of 21.5 million shekels, allowing 87-year-old founder Baruch Pernas to exit successfully.
Conversely, bad karma continues to plague a high-profile plot in Tel Aviv's Bavli neighborhood. Following years of legal battles originating from defunct organizer Inbal Or's ventures, the project's developer, Kozayoff family's Bereshit Group, and main contractor Electra Building have initiated massive mutual lawsuits reaching up to one billion shekels, following delays caused by a major tower fire three years ago.
