Israeli mortgages offer unique interest rate structures that differ from what you might be used to in the US or Europe. Understanding your options is key to making the right choice.
Types of Interest Rates
Israeli mortgages typically offer three main rate types: fixed-rate (Ribit Kvua), variable/Prime-linked (Ribit Prime), and CPI-linked (Ribit Madad). Most borrowers use a combination of these.
Fixed-Rate Mortgages
Fixed rates in Israel are typically offered for 5-10 year terms, not 30 years as in the US. After the fixed period, the rate may reset. Currently, fixed rates range from 4-6% depending on the term.
Prime-Linked Mortgages
These loans are tied to the Bank of Israel's Prime rate. When the central bank changes rates, your payment changes. Currently more expensive than fixed rates but offer flexibility if rates drop.
CPI-Linked Mortgages
These unique loans adjust based on Israel's Consumer Price Index. The base rate is lower, but your balance increases with inflation. Good in low-inflation environments, riskier when inflation is high.
Recommended Allocation
Many advisors recommend splitting your mortgage: perhaps 50-60% fixed for stability, 20-30% Prime-linked for flexibility, and 10-20% CPI-linked for potential savings. Your optimal mix depends on your risk tolerance and economic outlook.
Current Rate Environment
As of late 2024, Israeli rates remain elevated following global rate increases. However, many expect rates to stabilize or decrease in 2025, which could make variable components more attractive.