Bank of Israel Plans New Mortgage Restrictions, and Benefits for Buyers of Discounted Homes

A new set of draft regulations currently being formulated by the Bank of Israel is expected to impose new restrictions on “mortgage for any purpose” loans. This was revealed Tuesday morning by Globes, and conversations held by Nadlan Center with industry sources confirm the information to be accurate.

By Nimrod Bosu, Nadlan Center

“Mortgage for any purpose” loans are secured by residential property but may be used for purposes other than housing. Under the emerging restriction, banks will be limited in calculating the borrower’s monthly repayment ratio, so that all housing-related repayments — whether for purchase, renovation, or any other purpose — may not exceed 40% of a household’s disposable income.

This means that a borrower with a disposable income of 20,000 shekels could repay a maximum of 8,000 shekels per month for all housing-related obligations. Unlike the current situation, the remaining income may no longer be used to justify taking an additional loan. This measure is intended to reduce the risk arising from the growing use of such loans, particularly during a slowdown in apartment sales, which could lead to increased leverage, as the proportion of the loan relative to the property’s real value becomes larger.

According to Bank of Israel data, from the beginning of 2025 through the end of September, such loans totaled 5.5 billion shekels — significantly lower than the 79 billion shekels in regular mortgages during the same period. Despite the relatively high interest rates (5.5% for linked loans and 7% for unlinked loans), these loans remain attractive compared to standard consumer credit, where interest rates are often in the double digits.

However, the level of risk is also higher. According to sources quoted by Globes, the delinquency rate on “mortgage for any purpose” loans is double that of standard mortgages — 1.2% compared to only 0.6% of total mortgages.

Another measure included in the draft actually benefits borrowers — but only certain ones: buyers of discounted apartments through the government’s Discounted Apartment programs. Under the current policy, these buyers can receive a loan exceeding 75% of the purchase amount, since the 75% is calculated based on the appraiser’s assessment of the market value of the property rather than the actual transaction price — which is hundreds of thousands of shekels lower than its real market value.

Until now, buyers under the “Discounted Apartment” program could enjoy this benefit only for apartments priced below 1.8 million shekels. Under the new draft regulations, the eligibility threshold is expected to rise to 2.1 million shekels.